There's this thing that I've been bothered by for years now, so I figured I could ask the lore experts here. If there is no racial trait mixing in children, and they take mother's race with no exception, how exactly did bretons came to be?

Supposedly that the child will get characteristics of it's mother more but I like to think that rarely there are children born with qualities of both races, for instance I had an idea for a race of niben-mer a nomadic race of dunmer and nibenese who has the physical appearence of a nibenese cyrod and the ears and eyes of a Dunmer.

First of all, traits ARE passed down from the father, but these are typically minor. Eye/hair/skin color, dispositions, and other various physical or personality traits. A Orc whose father was a vampire might come out with pale gray skin. A Dunmer with an human father might come out with violet eyes or a significantly shorter lifespan. Nothing governs exactly what will be inherited from the father. Only that traits will predominantly come from the mother.

As to Bretons, they are the result of hundreds of years this sort of racial mixing to the extent that it has become a defining trait. A male Aldmer, for example, might mate a female Nede. Then that Nede, with a few handful of his father's traits might mate another female Nede who also had an Aldmer father. Their children would of course be Nede, but they would be Nedes with some of their grandfathers' traits. Then one of those children, a son, marries an Aldmer woman who had a Nede father herself. They would have merish offspring, but these offspring would have many human traits passed on to them. Then these children would marry, and so on and so forth. Multiplied over a thousand years.

Children inherit some characteristics from the father, as in the case of the Grey Prince (though the rules may be different there because http://uesp.net/wiki/Lore:Vampire). Basically, the interbreeding happened so long that even the characteristics from the father become more concrete down the line, yielding permanent elvish traits in the race when most of the individuals of the race had traits to pass on. That's the idea I think anyways.

edit: Got ninja'd by Fiore. She has a better explanation too.

A good example of this that come's to mind is the Gray Prince's father (TES IV: Oblivion) -- who was an imperial vampire. This apparently had some sort of effect on his skin complexion and heightened his abilities in battle. So I think while it's fair to say that while the child inherits the mother's primary race, the father hypothetically plays a role in more recessive traits like attributes and minor physical traits.