You retain your rank with your original nation, and start at rank one for your new one. If you return to your original, you get back your previous rank.
Key items, like the airship pass, are not lost.
However, you will lose all outpost warps. Permanently. You have to do them all over with your new nation. Even switching back cannot return them. [Incedentally, this is the reason keeping me from switching over to Windurst.]
I can't remember what happens to conquest points, but any items bought with them are still fine.
Also, you are not allowed to change nations if you're in the middle of a mission.