Yes, we respected the racial level limits rule as written.
We also allowed the possibility that exceptional means (such as, but not limited to, wishes) could accomplish exceptional ends.
I have never played in a group that used the expanded Unearthed Arcana character options, except for in abortive trials.
If one wanted unlimited advancement, then one took Thief, Assassin or Druid as appropriate. The common "house rule" I recall was removal of the Druid from the Half-Elf's options.