Well, if you're incandescent with fury at the wrongness of it all, I don't think any amount of explanation is going to throw water on that fire. But I'll do what I can without allowing this to become a flame-fest.
First of all, this is fantasy, not reality. Fantasy races are much more drastically different from each other than, say, people of Asian descent and people of African descent here on good ol' earth; or even people of Irish descent and people of French desecent here on good ol' earth. Any difference between these broad genetic communities of humans is, as far as the game goes, 100% insignificant, just like any difference between the genders. An elf marrying a human is not really to be thought of as an interracial couple, it's to be thought of as more the difference between a chimpanzee and a human, or a horse and a donkey, or breeds of dog...enough difference to make them work quite drastically different, to make them different species in some cases, but not always enough to make them infertile. So when you think of mongrelfolk, the real-world analouge would not be a mixed racial heritage, it would be more like two breeds of dog mixing....mongrelfolk are analgous to mutts, not to mixed-race humans.
Understandably, the comparison has been made by intolerant jackenapes between real-world human races and dog breeds as well, but the game definately does not share this highly offensive viewpoint. When the game talks about mixing races, it's not culturally divergant human societies (which all end up ultimately human), it's like mixing human with chimpanzee (which, if anything, would end up ultimately not human or chimp). It's a much more drastic degree, and it's not meant to refer to real-world people of mixed heritage, either.
Let's set aside first the questionable choice of referring to these people as "mongrels," which, depending on your source material (and personal experience, so sayeth a person of mixed heritage), is a bad thing.
Again, I would put yourself in the fantasy world, rather than seeing this (wrongly, I believe) as a comment on the real world. The fantasy world is hardly PC, and I don't think WotC has a duty to represent the fantasy world *as* PC. There are small people we call "halflings" and "dwarves" (potentially deragatory, especially to real-world little people); there are cultures that are called "barbaric" and "savage" (just because they don't share our values?); there often are racial jokes in the campaign world (effeminate men being called "elfish," for one, or about dwarves loving gold, or about gnomes and their ability to fit into catapults...). For a fantasy world, it would make sense that the common folk would refer to creatures of chimpanzee/bonobo/gorilla/macaque heritage as "mongrels," and even use it as a derogatory term. However, like halflings don't usually call themselves halflings, and lizardfolk don't call themselves lizardfolk, I doubt mongrelfolk call themselves mongrelfolk.
The intro paragraphs suggest mongrelfolk enjoy their outsider status, and that other people can't trust them because they can't be sure what race mongrels belong to. And for game mechanics, they're saddled with a -4 Charisma and -2 Intelligence penalty for some reason I just can't fathom.
Again, fantasy world, not reality. When your species can determine your alignment (goblins and orcs and kobolds are almost always evil; elves and gnomes and dwarves are almost always good), it makes sense to distrust someone of mixed heritage, because you can't be sure what side they're on. The -4 Charisma and -2 Intelligence probably come from the fact that most of the humanoid races (especially the evil ones) are uncharismatic and brutish. Combining mental and physical traits from these species probably compounds the problems. When an orc has a kid with a bugbear, you can't really hope for cleverness...
But then you've got chunks of text that suggest instead that mongrelfolk enjoy the other races and get along nicely with just about everyone because they're so open-minded and flexible.
Well, it obviously depends on the alignment of the interactor. Someone who is good and who recognizes the mongrelfolk as a sentient human being (read: most PC races) would probably be more open-minded than the general human community.
And let's not (OK, let's) take a closer look at mongrelfolk physical attributes -- a mix of other races, right? Pointy ears, but not too pointy; longish nose, but not too longish; strong jaw, but not too strong ... eyes like this race, mouth like that race ...
And somehow that's supposed to make them ugly (-4 Char!) or prompt others to assume the worst about their racial origins?!
It's less of a blending, and more of a Frankenstienian hodge-podge from what I gather. One ear is pointy, the other is droopy and filled with fuzz; the nose might be turned-up and orc-like while the mouth is filled with sharks' teeth that keep biting your own tongue. The skin is a patchwork of shades and textures -- patches of scales, patches of fur. The head is a misshapen blob somewhere between scrambled eggs and a deflated beach ball. One eye is albino-pink, the other one is reptilian...
Please. Try to explain this one to me. I could use a good laugh.
They are a people that, thematically, represent that idea that you are more than just your race and humanoid type. That your appearance and heritage do not dictate what you, yourself can become. They are mistrusted, but they do nothing to earn that mistrust. They are abused, and they do nothing to earn that abuse. They may not be pretty, but that doesn't mean they are worthless, and they may not have a lineage, but that doesn't mean they are untrustworthy. They are meant as a light to shine onto your fantasy society's corrupt and unfair system of merit and prestige, where an elf gets to be fencing master just because he's an elf, no matter who might be more superior at fencing. They are meant to question the paranoid fear of the commoners. They are meant to make PC's wonder if peace between the warring orc tribes and the small community might be possible, because beneath the repulsive exterior, we are all humanoids with free choice of our path in life.
I think you're getting too caught up in the idea that this is somehow an insult to any real-world people of any heritage. It's not, because the real-world human races are not divergant at all. It's the fantasy races that are, and they are more drastically divergent than just skin color, so having a mixed-species that is different fits more in the "genetic mutation" category than it does in the "mixed race" category.
So ease up off.
