Some interesting developments in our world.
Elves live in the forests to the west and are fairly secluded. They have a fey pact that grants them magic in exchange for certain terms. If any of you are ever interested, I believe we could devise an affiliation (see PH2 for how affiliations work) for those who follow the Arcana Compact. It would most likely be a racial affiliation for elves.
Dwarves dwell in the mountains to the south and are generally slaves of the orcs, though PC dwarves would of course be freed of their oppressors by hook or crook. I can imagine a dwarven liberation front as a potential PC affiliation as well.
Halfling clans are nomadic, driven by a shared dream that few of them remember. They are gypsy-like and many of them are rogues. Pretty standard fare.
The gnomes I really like (once again, great write-up, Deuce Traveler). A good explanation for the illusory abilities of gnomes. Gnomes were deeply touched by the Dreamer, be it mania or mechanical focus.
Goblins were driven to massive infighting by the Dream. They may have even been the dominant race before the Dream and it was this infighting that caused them to fall from power. A goblin hero named Ghrist Yon led several others in a ritual to save his race, which succeeded, but ended in his own demise.
And now I would like to add a bit of my own.