Just because a character isn't from thier homeland, does that mean they should be sapped of all culture and uniqueness? Similar to the accent argument, they should act as though they're from thier native lands. Also, the games are only a fraction of the real depiction. An Altmer trader can still get business, especially in the Imperial City, if they refuse other non Altmer. It's huge.
Orcs haven't been accepted by the empire for long. They where only accepted somewhere between Daggerfall and Morrowind. In Daggerfall I constantly killed Orcs. They where one of the main bad guys I'd see.This is all during the reign of Uriel Spetim, so it's not that long ago. Just think, racism still exists in our culture, even though it has been bad (for lack of a better term) for years. And it's often accepted in Nirn.
Of course. Most of the racism should take place in Inns if we're not in the province of a racist race. There should be the occasional shopkeeper that refuses certain races service, and the random racist guy.
What I want to see is better insults. I loved how Morrowind frequently had the likes of N'Wah and Fetcher. In Oblivion, an Imperial once called my Dunmer "Ash Born" :facepalm: