That's why I don't play games with alignments. Labelling someone for any reason is wrong. In the real world, a good and evil person is defined by their actions, not racism.
How does that in any fashion address the issue?
In the real world, the only people we know are humans. And racial divisions within humanity represent relatively small differences between people with a shared heritage, shared rights, shared dignities, and shared capacity for genius. So yes, in the real world, as things currently are, no one is defined by their race much less someone else's perception of race.
And yes, I think we can agree that in the real world and in D&D good and evil are defined by actions.
But here we have the return of the "labeling" issue. And once again, a red dragon is not labelled evil. A red dragon is evil. The red dragon's nature invariably leads to certain actions. A red dragon isn't merely labeled a different race than other dragons or other persons by some arbitrary classification. A red dragon is a whole different species.
I get what sort of stand you are taking here with regard to humanity, your fellow man, humankind, but this stand while laudable in that respect doesn't address the complexities of speculative fiction. Indeed, it doesn't even address the complexities available in hard science fiction, which is a genre of speculative fiction that deals with the plausible based on an extrapolation about what is currently known. And based on what is currently known, it's entirely possible to create a species either as AI or through biological engineering with characteristics, innate modes of behavior, and instincts which are congruent with the idea of "an evil species".
I feel like that in your eagerness to castigate a real world evil mode of thinking, that you are essentially condemning all speculation. That is to say, since racism is a real evil of this world, you are claiming that it is wrong to think about the problem of interactions between species when those species are not fundamentally similar in the way that human ethnic groups are fundamentally similar.
And speaking as a guy with some interest in AI, that strikes me as really naive and even dangerous. And speaking as a guy who runs RPGs, plays RPGs, and reads fantasy, that strikes me as an attempt to blanket condemn whole genres of fiction in a way I haven't seen, since interacting with religious fundamentalists that feel that any story with magic in it is evil.
So let me ask for a plain answer. Are you saying you don't feel comfortable playing in a game with alignments, or are you saying that anyone is wrong to do so?