Celebrim
Legend
To me, the DM is well within his rights to set the boundaries for what you can play in terms of race, class, alignment, background, etc. I have no problem with "this game is Players Handbook only" or "the basic four classes and races only" or even "human only, and no spellcasting".
I agree, but others find that line to be tyranny. And at some point, the DM could assert so much control over the PC's origins/personality/backstories/etc. that player is giving up significant agency. At some point, I'd rebel against DM misuse of his authority over the setting and say, "You are going to far."
I don't find it problematic for the DM to say what you can play; it's when the DM asserts control over a pc, e.g. "Your character wouldn't do that" type things.
I don't think you are going to find anyone that believes the DM has that right in the general case. The only exceptions to the general understanding that the DM doesn't play the character are going to be over things like possession, mind control, and so forth. Then the argument is going to be over how often that can happen before it constitutes DM abuse. That is going to depend in my experience on the player. I have one player at my current table that readily accepts loss of agency in return for power. I haven't found a real limit on what amount of freedom he'll give away in order to get mechanical rewards yet. He got possessed by a vengeful ghost spellcaster, and basically had a blast even though I was directing his goals of play and could overrule anything he did. He's willingly accepted ownership of an intelligent sword that regularly takes control of his character.
I'll agree that this isn't a simple binary by any means, but I usually can tell when a DM is on the wrong side of the line for my tastes. And, as always, this really is a matter of playstyle. There is no one answer to what makes a game badwrongfun that works for everyone, just one answer that works for me.
My general theory is a lot of this depends on what you get back on the exchange. Players will put up with a lot if the DM manages to make it fun.