I hope that dragonborn aren't divided by color in 4e. I was planning to use lizardfolk as my brute PC race anyway, so if they aren't distinctive colors I can adapt them a little more easily. I'll probably end up merging the lizardfolk and dragonborn, using the dragonborn in place of advanced lizardfolk or use them as tribes under stress who have made a deal to keep off human encroachment.
It would also be better for me because I'm also debating getting rid of the classic D&D dragon types (no good ones for example), and substituting others to make dragons a little more mysterious. Also to see if I can take advantage of some cheap McFarlane dragons.
Though I'm using dragonborn/lizardfolk myself, I do understand the complaint that tieflings and dragonborn are a little too monstrous for DM's who want a classic village or medieval city. Demihumans are easy to fit in a "civilized" venue, and even goblinoids aren't that much of a stretch.
However, dragons are nasty beasts that lay waste to entire cities, and demons and devils are about as pure concentrated evil as you can get. So it isn't just like the half-orc child, when orcs can be seen as an almost-human barbarian invader. You could imagine half-orcs as rough nobles of a feudal kingdom without that kingdom being considered evil and monstrous, though I doubt you could say the same about these two races. It just would seem more sinister than a ordinary human civilization. Some of that might be the influence of various writers treating orcs as barbarian demihumans, but I can't imagine any sort of treatment of Rosmary's baby or a walking crocodile doing anything to rehabilitate their image.
I was planning to use tieflings and lizardfolk in my campaign setting too, but they are definately not going to be integrated in the wider society. Tieflings as a secretive order of warlocks from a lost royal family, while lizardfolk have been displaced by humanity to inhabit the deserts and marshes that the humans don't want. So they will be exotic members of the party, but not integrated into the civilization.
Since I am the DM, I'll be in control of the NPC reactions, and it will go worse for the Tiefling than the lizardfolk. The reaction to the dragonborn would be similar to if someone was bringing a trained lion or bear into town. The local authorities would probaby wish to ensure that it was properly under control and not aggressive (perhaps with a warning that they would be held liable for any destruction or injury it caused). Of course, this reaction fits because I'm also doing something a little different with lizardfolk. I am taking away their ability to do abstract thought that isn't a reaction to their environment (which besides making them unable to be clerics or wizards, makes them horrible tacticians, so I probably have to rethink warlord as a favored class).
Tieflings will be rare enough that people will not necessarily know what they are. However, anyone familiar with their nature can expect to treat them with outright hostility at best.
