...and i live in a tank breathing strange gas!

I was wondering how you would go about designing a game based on a setting which featured noble houses, such as Dune or Song of Ice and Fire? Specifically regarding player characters and character creation? How would the pc's work together or fit together?

Look at the PC game Elder Scrolls III: Morrowind, it has a good take on the concept. I can't believe I'm recommending a computer game, but there it is.

which is?

Doesn't Reign involve building your own dynasties much like that? At least, that's my understanding based on the snippets over at RPGnet.

(And of course, there's always the realm generation in Nobilis.)

Well, by itself this doesn't really change a thing. I mean, most fantasy or sci-fir world contain noble houses, corporations or something similar. How that helps or hinders all depends on the campaign. If there's no big common enemy, than you can expect trouble if players come from opposing houses, of course.

If the noble houses play a big role in the campaign (as opposed to just the setting), then I'd suggest avoiding too much possible conflict. Players work better together if they're in the same house or from allied houses. The latter might actually work better if there's much in-fighting. If you've got a bunch of brothers backstabbing each other, the main plot might be lost. Well, if the back-stabbing _isn't_ the main plot.

Generally it helps to have a good "relation map" of the different factions. Who's allied with whom, proposed marriages, hostages etc.

And every noble house needs a cool slogan. Either latin or plain English. When someone says "Winter is coming" at the appropriate time, the game works...