What happens if, through no fault of their own, an instance that a user has been investing their time in decides to rift against the other instances?

If Lemmy.defederated gets defederated from Lemmy.world ( (or goes offline) and now you can't participate at !coffee@lemmy.world with that account you can create a new one at Lemmy.federated and you can resume participation. If the community was !coffee@lemmy.defederated then folks can migrate to an existing community (such as one on a different instance) or recreate it on an instance that is still federated with the bulk of the network. This wouldn't be without annoyances or difficulties but moving within the network will be easier than changing systems entirely.

In the future there could be many disconnected factions of Lemmy instances and users struggling to manage several different accounts if they want to see content across them? In that case they may also see many duplicates as people cross post across the disconnected instances?

Unless the subsections are largely of equal size I think people will migrate to the network that is larger and contains more content. I tend to see isolated networks existing only when they are significantly different in culture or content that isn't found in the network at large and they can maintain a large enough user base to be self-sustaining. If an isolated network of 5 instances that want to be exclusively pig Latin speaking and don't want fifthly non-pig Latin speakers federated with them is able to sustain itself with the user base interested in this: more power to them. People will either decide which network they want or they'll have two accounts.

As far as managing those accounts, I use Liftoff and it supports multiple accounts and on a browser it is as simple as multiple bookmarks. I can have accounts on instances in a different network. So if I really love discussion about coffee in pig Latin I can easily swap accounts on the fly to get access to the latest discussions about ewingbray ethay erfectpay enchfray esspray offeecay.

That does appear to be a problem with the model, yes. Time will tell I guess. The other side to that coin is "what if I want to interact with other federated platforms, like Mastodon, from the one account?". I believe that's what Kbin is trying to achieve. All of this technology (ActivityPub) is in it's infancy still.