D&D has a lot of intelligent races; that focus on bigotry is actually part of its charm for me since at least first edition.
In Basic, where race-is-class, I think the game is actually better at dodging well-deserved charges of racism: sure being an elf means you drive your car like this while being a halfling means you do it like that, but the game is coarse and unapologetic: characters don’t have enough detail to differentiate anyway.
Third edition and later (I haven’t thought hard enough about second yet!) don’t get off as easily, though. You have enough characterization that the the choice of character race for additional elves-drive-like-this thing is perceptible and it rankles. You can always pick human if you want to, but by the rules, a dwarven fighter has some real advantages which encourage that choice.
Human is the default, which is another way of saying second best.
So, my idea for my next campaign: call the jingoism out for what it is. Characters pick classes, which might include certain extreme what-are-today-called-races like fairy or dragon-man or sentient-crystal-avalanche.
They pick “races” from a list of “folk” which doesn’t include a choice for “human” because they can all interbreed; instead it’s either choices like “castleborn” for a single-kingdom low-mobility game, or “Cimmerian” for a more-traditional D&D feeling.
(P.S.: whoever added Cimmerian to the Android spell checker is a smart cookie!)
Everyone is human, or maybe no-one is; by changing the “character race” selection, I hope I can change the conversation so that alien physiognomy is a choice the player makes because they want it, not because they want to resist poison, wear chainmail and have more hit points.
I can use this, if I apply it across the campaign, to have my kobolds and eat them, too. If there are a few broad groupings of species based on really broad body types plus a bit of mythical thinking, I can have Bullywugs and Grippli both. All I need to do is to resist the compulsion to treat separate Monster Manual entries as Platonically different things; they can probably interbreed or whatever, and their differences are in temperament and training.
Look at dogs; one species, real differences in physiology and temperament; one species.
On that topic… Dwarves suck and are unmythic.
They’re stout humans with beards, a love of digging, metalcraft and axes, and tenacity. Oh, and they’ve a lawful bent and good trade relationships with humans. They hate goblins, orcs, and giants.
And because of the vagaries of size-based modifiers, Dwarves are medium-sized.
You can inject some story into them if you need to, but Oh Gygax! they bore me.
Theorem: any story or character you want to tell using dwarves can be better told using one or more of fantasy Klingons (not-quite Orcs or Hobgoblins), gnomes, or goblins from a story-level. D&D has made choices to differentiate these things on a rule level, but it’s not necessary, given my designs above at merging Folk, to consider that these are necessarily different things.
Klingons have the warrior culture, biology and outlook; they love to drink and party, they value honor and armor and well-made weaponry; they’re medium sized and industrial. But they’re also mixed as allies to humans go, they are the orcs and goblins today’s dwarves dislike, and they don’t mine. They’re not perfect, but they capture the Player Character Dwarven Fighter I so often see, with the bonus that they’re not human; they’re more ambiguous.
Gnomes have the earthen connection, the small size that Dwarves should have, a shared love of technology and metalwork, and a Norse-myth echo of magical item creation. The illusionist thing is off key, but I feel that was a D&Dism to give them a niche taken by the dwarf. A Gnomish vision of Dwarves has them as small, nimble (or twisted!) tunnel dwellers rather than as battle-tanks; that appeals to me. I can see them hoarding treasures in dungeons they built themselves, kidnapping children to raise as their own, serving in fairy courts. This is how C. S. Lewis uses his Dwarfs in Narnia; L. Frank Baum does the same with Nomes in Oz.
Goblins? Goblins are just gnomes with worse P.R.