On Allarin being Small-size for various melee rough and tumbles:
I like that. You should add "unless their wings are unfurled and the allarin can use them for stability. This make the Allarin Large for combat purposes." Or something like that.
That's what the Grounded feat is for. Though I'll probably add the large size aspect to thet feat

. Basically you can "buy back" a lot of your penalties with feats in this set up.
On not being able to fly with a heavy load:
You left out the verbal component "Up, up and away!" There are standard rules for flight under a heavy load. It's not worth disallowing flight under heavy load, IMO.
I see one passing mention of it in the description of speed in the monster manual. Is there somewhere else I should be looking for this rule? I wanted to reiterate it so the Gull's Grace feat had an immediate hook.
On the long, but not unlimited duration of flight:
This is not a limitation. PCs tend not to work more than 2-3 hours a day. So this means they can fly whenever they really need to. It's also an annoying amount of bookkeeping.
I think it's a tragic statement about the game that if "it's not a limitation
in combat, then it's not a limitiation"

. I would never track hours of use for combat purposes. The point here isn't about the combat utility of the race - this line tells me a lot about their culture.
They can't fly all day! No continuously flying patrols without large enough numbers to have lots of shifts. And more importantly for PCs, you can't use your flying rate for overland travel...
On being effectively a Large-size target with your wings spread:
I like this. You should add in the -4 to Hide checks as well.
I'm not really sure how you make Hide checks while out in the open (in three dimensions no less), but I'll add the text... What would be nice is if size actually effected spot checks from a distance. You ought to be easier to spot comming than a human-size mage with a
fly spell going...
...Huh. Allarin Shadowdancers would be rather weird...
On the penalty to spell casting while flying:
You mean casting while under vigorous motion, right?
*rummage-rummage* Hmm. Yes, those rules look promising. I'll work that in. Thanks

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Casting defensively only applies to not getting struck by enemy weaponry when you let your guard down.
Hmm. How would you interpret both conditions going on? Two checks?
In the increased damage of bludgeoning weapons:
Technically, you should say the critical multiplier is doubled. That's the game term for adding one to a multiplier.
It's never going to -not- bother me to make a statement that is categorically untrue. You do not "double" the damage from crits by increasing the multiplier by one ((x2 to x3 is not "doubling" to me). As I've seen various effects that "increase the multiplier by 1" I'm much more comfortable with that wording that relying on the the mathmatical cludge of running two multipliers together (x2 + x3 = x4 ~ not x6)

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Just warming up. Once they're being matched to a setting, I might change some more. This is a pretty generic "I'd like to be able to fly at low levels, and not break the game" build.