The whole working things down to what the player actually wants thing is what I do too. I just do it so the end result is they play a human that meets their needs. If they really have to play an actual Hutt, then I'm also with you in that it's simply a no go.
Okay but like...honest question, why does it
have to
always be a human? That seems like a pretty narrow line to draw: every player must fundamentally play the same thing. That doesn't sound like openness to changing your mind at all; it sounds like "play what I've told you to play," if I'm being honest. I fear I can't recall your specific reason for not permitting non-human races, so perhaps I'm missing something there.
But there are limits. That, I think, is all I'm really trying to establish here. There's a line somewhere that no player's desire could tug-of-war you across despite every good faith intention to meet them in the middle in your negotiations, and for you that line lives somewhere in the vicinity of "the player wants to play something that would be abusive, coercive, disruptive, unfair, impractical, etc."
Well, alright. I had said that before, but perhaps it could not be grokked without being closely examined. I refuse to be a
doormat, but think I have a duty to be a
diplomat. I am, after all, the one who has to pitch a faraway land for visitation!
My line lives closer to the mark of "the setting lore is preestablished and therefore inviolate." My point is simply this: we can't judge someone based on where their red line is, it's subjective, it's preferential, it's highly variable, and one DM drawing a tighter circle than another around the nebula of acceptability for a campaign's character options doesn't make that DM bad, tyrannical, a Viking Hat, etc. (I don't think you've gone there personally, but others in this thread definitely have.) Neither do I think that a DM who's more flexible than I am is bad, a pushover, too permissive, etc. All I've maintained is, "not in the games I'm running and playing in."
I guess I'm just really skeptical of this "the setting is inviolate" concept. Like, there's elements I'm not going to budge on for my setting, but not anything at the level of specificity that would prevent this sort of thing. It's stuff like "evil cults don't operate in the open" or "this world hasn't entered the Industrial Era." A lot of the world is unknown to the people living in the area the players do. That's part of why there's wonder and mystery; you truly DON'T know who might be wandering the markets of Al-Rakkah. It could be someone from an obscure distant plane, selling displacer beasts. It could be someone from one of the Ten Thousand Isles of the Sapphire Sea. It could be someone from a land as far away from Yuxia as Yuxia is from Al-Rakkah (think "separated by the Pacific Ocean"). Al-Rakkah is the trading capital of its region if not its continent, and by far the largest single city for thousands of miles in any direction (roughly a quarter to half a million people, roughly the size of medieval Cairo at its height); it is a bustling port of call for both mortal-world and interplanar travellers; etc.
If the setting is so inviolate and already-defined, what place is there for the players to do anything about it? If there is no "beyond the horizon," there are only finitely many surprises to be had, after which the world runs a risk of going "stale," so to speak. With a world intentionally left not-fully-defined, it is always possible for new surprises to appear, but not required that they do. More importantly, it's always possible for
me to be surprised, which is a delight.
Thank you, I appreciate that.
Er...yes?

Are you saying that my players are having "badwrongfun" because they enjoy a more humancentric, classical, 'medieval' feeling to the world? Huh...ok. To each their own I guess.
It's not the player behavior that bothers me. It's you outright
talking to other players, rather than the one who chose to play a non-human character, purely because they played non-human characters--and then referring to this as a "problem" and implying that the problem player either chooses the response you actually want them to have (playing humans) or leaves the game.
It may or may not be something you're aware of, but being treated this way is one of the most harmful day-in/day-out kinds of discriminatory treatment a person can receive: essentially being un-personed by the people they interact with. I haven't had to endure much of this myself, as my non-normative characteristics aren't visible to the naked eye. But I have both good friends and past acquaintances who are PoC, cis female, trans in general, autism spectrum, etc. who have had to live a life being treated this way. Having it show up in their gaming would be incredibly hurtful. Treating this as though it is completely innocent or even a "problem-solving" behavior is disheartening, maybe even mildly distressing.
It just comes across as very disrespectful of what your players actually like. You openly state that people do a thing mostly because they think it's cool. And then you engage in a behavior that straight-up tells them, "The things you think are cool are garbage. Like better things," just by actions rather than words. That's...well, as I said, disheartening.
That's not to say they always play Humans. They play lots of the other races...even the ones that get the 'stink eye' from most of the humans in the world. This, believe it or not, leads to a lot of fun and interesting roleplaying. The expectations of walking into a human town (most are) when you are a dwarf provides a VERY distinct feeling for the player and the other players (and me) at the table. The Dwarf would be treated as a 'stereotypical' Dwarf (likes dirt, loves to mine, fascination with hard labour and gold/precocious metals, ale and beer, etc).
Honest question: Why is that the only possible stereotype? Surely it is possible for dwarves to not always have 100% exactly the same stereotypes from other groups in every setting. Or for there to be distinct groups of dwarves who have different outsider-view stereotypes.
Beyond that, though, have you considered looking at any of the real-world cultures where this would have been unusual? I mentioned earlier in the thread that one of the main inspirations for my game is Al-Andalus, what the medieval English often called "Moorish Spain." Al-Andalus was a beacon of both enlightenment and tolerance, where you had North and (to a lesser extent) Sub-Saharan Africans living right alongside northern Europeans and outright Arabs, where a cathedral might be built next to a mosque and would give the Roman Catholic Mass in Arabic, where Jews were not persecuted but welcomed as brothers under the God of Abraham, and where numerous ancient Greek texts on mathematics, science, and philosophy were re-translated into European languages because they had been
lost to Europe but preserved by Arabic scholars in Asia Minor and the Levant. A center of learning, trade, and cultural acceptance, Al-Andalus is exactly the kind of place where people DID look past major differences in order to find major similarities.
What I'm saying is: stereotypes generally exist in areas where well-entrenched but highly distinct cultures have contact (such as Roman stereotypes of Greeks and vice-versa). But we have well-documented examples of strong cultural blending centered smack in the middle of the Medieval Period, with Christians doing beautiful Arabic calligraphy and Muslims borrowing Roman construction techniques, etc. Under such circumstances, stereotypes become more about which cultural
in-groups you belong to--and these are much more likely to be diverse things, which (in my experience) encourages thinking about
why the character belongs to that cultural in-group rather than a different one.
For me, when I've played in other DM's worlds where the DM just had blanket "every race never judges other races", ALL of the NPC's of non-human races come across as...well... "humans in funny suits". Nothing distinguishes them. There is, literally, nothing that gives me (or the other Players/DM) any 'roleplaying meat' to bite into. If everyone accepts everyone without question, bias, judgement, preference, favouritism, etc...then everyone encountered might as we just have "Whatever" listed as several locations on the character sheet. At least, IMHO.
It sounds to me like these DMs have made the mistake of failing to actually create any cultural groups at all, which is very much distinct from mutual acceptance between "mostly human-like" and "variably less human-like" physiology. In fact, this sounds (to me) like
the DM making the mistake of using race as a shorthand for culture, creating a world that is simply a Planet of Hats. In
Jewel of the Desert, I have gone out of my way to demonstrate that there are numerous different internal divisions of Tarrakhunan culture, but that these have little to nothing to do with
race proper. (Not
absolutely nothing, e.g. orcs are somewhat more common among the Nomad Tribes rather than the city-folk, but orcs are FAR from uncommon in the cities.) Instead, they have to do with things like religion (the common folk, the Safiqi priesthood, the Kahina druids/shamans, the evil Raven-Shadow cult, etc.), occupation (the hunters of the wastes, the Rawuna storytellers, the Waziri mages, the military, the merchant class), or tribe/clan/etc. (the Nomad Tribes vs. the city-folk vs. ordinary foreigners vs. Jinnistani genies, mostly).
I have specifically made the effort to demonstrate that these different groups have sometimes very different values, behaviors, or perspectives--and that sometimes these differences lead to conflict. Yet it would be seen as silly to call the Nomad Tribes "barbarians," because they share the same fundamental culture, they're just nomadic rather than settled. It would be ridiculous to say that the Safiqi are "real" Tarrakhunans while the Kahina are not, or vice-versa. And it would be nothing short of
baffling to assert that a dragonborn Kahina should be more like a dragonborn Safiqi than a human Kahina--their race is vanishingly small in comparison to their religious and social differences.
Planet-of-Hats-itis is a problem. But it's not a problem
because it contains things that aren't humans. It's a problem because it resorts to lazy shorthands (stereotypes) rather than doing the work of cultural, social, and personality development. DMs can be just as prone to it as players, and mandating that everyone play humans does not mean that people won't resort to stereotypes. They'll just be (slightly) different
sets of stereotypes, if the player or DM isn't willing to do the work. Having people willing to do the work is what actually fixes the problem.