Is this thread's premise on the verge of racism, or is that just me?
Apparently it's not just you, but it's still note quite correct.
This thread is about cultures. And it is very normal that different races should have different cultures, and show that. And that's all. You can argue with racism all you want, that doesn't help the fact that many Indian immigrants in Great Britain still arrange their marriages or wear saris or turbans. Or whatever example you can think of. No real country has a multicultural society where everyone is completely assimilated. I actually think that would be a horrible thing.
I don't know, in our English class back at school, we discussed this topic for about 2 years in the context of different literature. "Heart of Darkness", "The Second Hut", "My Son the Fanatic", "If", just to name a few examples. It is a very important topic in modern society, and it is something that should definitely be done in the right way in a game that has a clash of not two, but ten different cultures, not to mention the fact that most of the races actually have at least two different cultures themselves already (Colovians/Nibeneans, Forebears/Crowns, Hlaalu/Telvanni/Ashlanders/... etc.).
I distinctly remember one of my friends being outraged that humans with dark skin (blacks) were an entirely different race altogether from their lighter counterparts, and in Morrowind they were even better at running away than most races. If you are simply trolling, of which you are suspect, then please be on your way. If you are dead serious, please remember that race is a very sensitive issue and that mods are there for a reason.
I don't think the problem is calling them a different race. If you'd call them a different species, that would be a whole new level of racism (one where the racist wouldn't even acknowledge it's racism, but claim it's speciesism). But saying they're a different race is, as far as my biological knowledge goes, pretty much according to the http://en.wikipedia.org/wiki/Human#Race_and_ethnicity.
However in TES, it's all a bit complicated, I mean which of these "races" are actually the same species? As far as I know, Argonians have a completely different background than elves and men.
But like I said, the discussion about race is moot, what's important is that these "visually different types of characters which all hail from specific parts of the world" should get their own cultures more fleshed out. Read the "Redguard" comic to learn about the culture of the Redguards, for example. There are certain key elements in the story that are all very much based on the Redguard culture; it completely would NOT work for Imperials, Bretons or Nords.