Firstly.. npcs do not detect sarcasm at all. There is a man in windhelm who asks you "are you one of those "skyrim for the nords types?" " playing as a wood elf i picked the "outsiders like me have no place in windhelm" He then calls me racist and refuses to speak to me... yeah... he also calls me a nord too..


There are some times where you get to pick between the polite way and the idiotic bighead way and you often get praised for picking the idiot option

Maybe the person you are talking to is racist? I mean if you say the N word to someone that is not a racist they will be offended.
You say it to a KKK member and they will praise you.

Yea, Bethesda has always had issues with their dialogue system. It's getting better but still far from good (they need to learn a thing or two from BioWare).

I've also been called a Nord several times -- I'm Khajiit.