does anyone else think giants have a more diverse background? i know they were once allies with the dwemer, and they have some kind of religion or deity because of the markings on their skin and around their camps. I don't know, share your thoughts.

There is a http://www.imperial-library.info/content/giants-discourse in ES:O that goes a little into giant culture. Beyond that, not much is known on how giants conduct themselves. Not sure about the alliance with the Dwemer though, I thought it was merely a observation on how small they were (comparatively) to them, I don't think there was a actual alliance between them.

Interesting to see how Lyris is explained... she is apparently "half-giant" whatever that means. Is this new to Elder Scrolls?

Technically. But it's implied to be possible in Notes on Racial Phylogeny, given that giants seem to be of Ehlnofax stock.

I don't even want to think about how she was... Wait a minute, that's not how children work in TES! Even being "half-giant", she would still look either completely man/mer or completely Giant after her mother,

I thought by "half-giant" he meant the concept of giants breeding with non-giants.

Being half something usually means that those two races... well... how would that work... lol... I mean... yeah... wtf. Could you imagine a Giant and a Nord women together... and she actually lived through that?

It is theoretically possible, if impractical in a mechanical sense.

I assume "half-giant" was simply referring to her great stature, not her heritage

People can make up [censored] about their name's importance. Mazoga's mother was a rock and her father a caterpillar.

Generally the offspring bear the racial traits of the mother, though some traces of the father's race may also be present.

-Notes on Racial Phylogeny

Traits from the father can be present in the offspring.

Also, Lyris would actually be a Quarter-Giant as her father was a Half-Giant and her mother was a Nord.

Well, the ghost of her dead father was a half-giant, since her mother died giving birth to her, and he mentioned "the blood of giants flows through my veins" so at some point Atmorans and Giants inter-breeded, producing the rare half-giants, who's descendants continued the dominant giant geen. Lyris is a nord Half-Giant, meaning that giant's blood flows through her veins.