There are no conflicts between completing Rawal's quests and any others. However, to win the game you must choose one of the five factions, neutrality is not an option. Alwan and Taygen are Pro-Shaper options, Trakovites, Astoria and Rebels are Pro-Rebel options. Rawal does have an ending, but it's more of a non-standard game over. I'd recommend saving just before making that final decision, so you can see that ending. Also, sneaking is a viable option gameplay-wise, but you will miss out on a lot of XP.
As for balancing skills, that's good to a point, but don't put too much xp into what you're weak in, as this will seriously hinder you, especially as often you can buy these skills from trainers for gold (Combat from a Guardian in Isenwood, Sage Quoth will provide magic training in Haria-Kel and there's no option for shaping).
Finally, I don't think there's a 'Best Option' in terms of factions, it's more about the story than power, but I do know that the Trakovites won't teach you shaping, which late-game doesn't matter as War Tralls, Drakons and Gazers are only attainable through canisters.