I'd never really considered the use of "race" as a term for species within fantasy settings (e.g. Dwarves, Elves etc.). Darrell has some interesting thoughts, written through the lens of his take on Eugene Marshall's Ancestry and Culture D&D supplement, which explicitly seeks to remove "race" from that game world, providing an alternative structure. The idea is that a character should have traits derived from their cultural upbringing (skills) and their ancestral lineage (physical properties/abilities, including stuff like propensity to magic or ability to see in low light). It's a cool idea and sounds like it does a solid enough job of expanding the world-building potential in and of itself to be adopted without further context.
But, the realisation that "race" is likely problematic is worthy of discussion and thought by itself. My immediate reaction was that it's incorrectly applied at a species level anyway; on Earth, we use race to differentiate within a species. But, as Darrell argues, that distinction for humans is largely invented and has a long, storied history bound to oppression, enslavement, genocide, and a whole host of other depressing and awful concepts/actions/deeds etc. In other words, even where used correctly, it may be better to rethink it. And that's before you consider that many fantasy "races" are just racist stereotypes dressed up in different, non-human skin tones. Lots to think about.
