Hybrid races:Well here's a thought we never heard before
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Actually, you likely haven't heard it this way before as what I'd suggest is that there ARE hybrid races but NOT visually.
No, mixing a Orc and a Dunmer won't give you a green elf or a blue skinned Orc.
However what it does it mixing the race specific attributes, immunities and weaknesses.
This would actually be in canon with the lore since this is how Bretons where created, they still look 100% human even though they stem from generations of controlled breeding between humans and elf's, they simply have enhanced magical abilities.
Now the way this would be handled is taking the mothers and fathers racial stats, it would take 75% of the mothers and 25% of the fathers and mix them together. Visually it would always be the mother race though, as mentioned, no visual mixing between them.
That way you could also chose your mothers and fathers race in the beginning, this wouldn't contradict the "of unknown parents" part the games usually start off with as you'd only know their race but nothing else.
However the character editor should actually be advanced enough to create mixed looking races, at least to make them somewhat appear like that, for example a Bosmer who wouldn't stick out between Nords since he's built and has a similar face like one.
I asked about this before and got a link to a lore page about it, here's how it works:
Argonians can only mix with Argonians
Khajiits can only mix with Khajiits
Nords, Elves, Imperials, Bretons, Orcs and Redguards can all mix but the offspring will retain most of the mothers attributes and race. An example of a hybrid would be the Gray Prince from Oblivion, he was an Orc like his mother but was also a small part vampire.
I wouldn't mind seeing a bit of Back story to my Character in TES 5, I heard DOA did back stories well. Here are some I've thought of.
Argonian: Father was a Shadowscale and mother was a thief=increased points to Sneak, Lockpicking and either daggers or Archery
Khajiit: Born a beggar, Family were killed of disease but you survived. Made a slave and sent to fight in the Arena but became free after winning lots of Matches: Increased resistance to disease, speech craft/sneak, blade/blunt/marksmen/hand to hand
these are two ideas I came up with, you should be able to make your character and make choices on how your background effected your character. The Argonian only had increased sneak, lock picking and some sort f weapon because the mother and father had professions in that area. The Khajiit had increased disease because he/she survived the disease that killed his/her family, increased speech craft or sneak because he/she must have learn't how to get money as a beggar and an increased area of fighting because he/she was in the Arena.
Maybe after choosing the choices of your background you do a quest that lets you end up where you start, the Argonians family could have been killed by the legion or betrayed by the Dark Brotherhood and he/she has to get revenge. The Khajiit could try and escape the Arena with help from other Gladiators or not. Your choices should help determine how a lot of things happen in TES 5, whether its a quest line or character creation it should be there so every play through is different and unique.