Way back when, the races available to the A/D&D game were, despite Gygax’s later (and possibly lawsuit-derived) comments to the contrary, clearly gotten from Tolkien. Humans, Dwarves, Elves (and Half-Elves!), Hobbits (…err… Halflings). There was lip service in the original 3LBB’s to allowing player-character monster races, but precious little guidance in how to do so without letting that 2nd level Balrog thief dominate the game. That meager menu was later added to with Half-Orcs and Gnomes, and there the stable pretty much remained until around the time of Unearthed Arcana, and then 2E opened up the flood gates.
That’s not to say that there weren’t moves to push the boundaries early on. The pages of The Dragon were stuffed with alternative PC races (the Winged Folk being a personal favorite), Arduin took a flamethrower to the fences surrounding what was and was not acceptable. Other games introduced other races, ranging from the weird-as-hell to elves-with-different-colored-skin. But the human-elf-dwarf triad seemed to be a constant throughout (there were naturally exceptions; Skyrealms of Jorune being the example that jumps out of my memory jumping up and down demanding attention on this point. Thriddle fool!).
From a literary standpoint, given the pulp fantasy origins for the original game, Tolkien’s influence cannot be denied. Simply put, one of the hallmarks of pulp fantasy is a human-centric world. Conan knew no Elves. No caravans of Dwarves showed up at the gates of Lankhmar (to be fair, Nehwon does have its Ghouls, but they’re pretty much just transparent humans). The Dying Earth was free of whatever Gnome population it might once have sported. No, the standard fantasy world mirepoix came from Tolkien. (I’ll deal with the Norse mythology claim in a bit.)
So that’s one of the first things I’m inclined not only to question, but to jettison wholesale. I want my world to have a unique feel and flavor, and neo-Tolkien is not the way I want to do it. But neither do I want to go the Dragonlance route and simply pluck out a couple of interesting monster races and elevate them to the status of “replacement demi-humans”, like they did later on with Minotaurs. On the other hand, simply having an all-human campaign setting would be dull, if only from a character generation standpoint, even if it would be more consistent with a pulp-fantasy mindset.
Functionally, though, what do character races bring to the table? Choice of race most often reflects in adjustments to character statistics; Elves, being more lithe, get a bonus to their dexterity. Dwarves, being burly, get a constitution bonus. Etc. Some games also give non-human races unique abilities (being able to see in the dark, resistence to poison or magic, etc.). And sometimes the choice of race will also have an impact on day-to-day game mechanics, either in terms of level advancement (as with AD&D’s class level advancement limits) or in adjustments to skills (and that applies to both class- and skill- based systems).
This is what often causes a bit of a wrench in terms of play balance. After all, who wants to play a human fighter when you can play a dwarf and get some special powers and resistences thrown into the bargain? Different games attempt to balance this out in different ways, but rarely, to my mind, successfully. Unless you’re planning on playing a years-long campaign where your elf wizard will really run up against that glass ceiling, a demi-human is still the best choice for a character in A/D&D. Naturally, that’s what most gamers aspire to (at least I and my gaming buddies do), but realistically, the game-balance mechanic doesn’t come into play often enough to truly function.
And that brings us back to the pulp fantasy roots of the genre. I mentioned before that Conan never met an Elf. True enough, but he did meet Hyborians, and Turanians, and Stygians, and Shemites, and Kushites. Aesir and Vanir, Picts and Hyperboreans… And each race (and by that I mean “race of men”) was not merely a nationality. The Hyborians were a dynamic race, ruling a dozen kingdoms including Aquilonia and Nemedia. There was a Turanian Empire, but there were also outposts of Turanian society in different realms as well. Gygax caught a little of this in his World of Greyhawk when he had Suel, Flan, Baklunish, and Oeridian humans. But while choice of sub-race was possible, there really wasn’t any sort of reason to be one or another, other than if one wanted one’s character to wear checked pants instead of plaid.
I would like to see a human-only game, but one in which there are a number of different human races, each of which has real consequences for choice. Just to take a couple of examples from history, a character of Mongol stock might well begin with bonuses to skills relating to horsemanship. A Norseman might well get some sort of bonus for physical attributes, owing to their larger average stature. A Roman might automatically be literate. And so forth. In the fantasy world, of course, I’d be freer to indulge in some stereotyping, and make the bonuses have a little more impact on character design and play. And if there is no “baseline option”, and every race of men has its own set of bonuses, then the problem of game balance goes away, assuming each has some sort of roughly-equivalent impact. No need for a downside if everyone has an upside (at least from a game balance perspective).
This is not to say that I would like to see Elves and Dwarves and such banished from the game. While this seems like a contradiction, I would point out that I had earlier said that I want the game to incorporate more folkloric elements. Elves and Dwarves, for example, exist in Norse mythology (and endured in various capacities far after the Norse were converted to Christianity), but as supernatural beings, not the sort of living side-by-side with men as just another sentient race as they are depicted in Tolkien and Gygax. Eventually, these figures were ensconsed in the folklore of northern Europe as the “hidden folk”, fairies, etc. Goblins, kobolds, and the like were similarly originally diminutive spirits rather than being seen alongside humans on the street (or at least in everyday life).
I’d like to return to that sort of conception; the waking world is dominated by humans, with real differences among the human races, but there exists a “hidden world” of fairies, sprites, dwarves, elves, kobolds, etc. that can be dealt with on different terms. Don’t accept the cup of wine from the elves, lest you sleep for a hundred years…
That picture was in Basic 81, wasn't it?
I'd argue that elves and dwarves were originally less Tolkien-influenced than many people believe, although by AD&D 1e and beyond, they had become almost 90% Tolkienized. There were other fantasy sources with elves and dwarves, like Dilvish the Damned, Lord Dunsany, Eddison. And I'd argue that the original LBB elves were just de-supernaturalized fae from Arthurian romance.
But I'm definitely in agreement that re-supernaturalized elves and dwarves would be more interesting, and more cultural variation within humanity would be a tremendous improvement.
Iron Heroes does a decent job of differentiating humans by their traits. I'm using it in my homebrew 3rd-century Roman world and it fits perfectly.
Gygax actually did attempt to add a game-mechanic effect to choosing different human sub-races, in some cases. One notable example is the Rhenee (sp?), the gypsy-like barge folk in Greyhawk, who were given different stat ranges from the norm. Then, if you played a barbarian, you had different skills depending upon your region/race. I think this may have been picked up later on in the Scarlet Brotherhood supplement, giving different game mechanic traits to various races in the Amedio Jungle, etc., but I'm not certain.
I'm just a lurker here, but I would suggest going the way of Vance's Lyonesse for the races' feel you've described.