This isn't normalizing racism though. ... elves and dwarves
But one can see how overt racism between "elves and dwarves" perpetuates racist ways of things into the reallife future generations.
One is literally "roleplaying" a racist, psychologically modeling the behaviors, learning and practicing how to be a racist.
D&D is a playful safe space. One can explore taboo subjects in a play space, like a criminal Rogue or worse, depending on a particular gaming table.
Still, I find it difficult to see how perpetuating a fantasy racist culture as part of a core experience that every D&D player everywhere must engage in, is of any benefit to the D&D game or the WotC corporation.
Moreover we can see how the earlier editions of D&D that did encourage racism − depicted racisms that were not so far away from actual reallife racisms, whether black skin being assumed to signify Evil, Orcs explicitly belittling reallife ethnicities, the representation of slaves as being void of any human dignity or presence, and much more.
These fantasy racisms lack merit.