There's another side to all of this, though ... the player side. The DM creates the world, but the players tell the story. Yes, there should be some limitations based on cultural consistency and game balance; yes, the DM should keep his head above water in the sea of secondary material. However, it's my belief that if you aren't as welcoming as possible to the sort of character a player wants to be, you're showing the signs of weak DMing. I always try to make it possible for a player to achieve his vision of a character, with as much respect as I demand for my vision of a campaign setting.
I personally don't like campaigns where the game is sculpted down to a nubbin for the DM's "art." I'm not accusing anyone on this post of necesarily doing that, but I'm wary of the "it's your world and yours alone" viewpoint that many DMs have. I think there's a step up to a higher plane of "it's our world." I suspect (putting words in his mouth) that that's what Piratecat meant when he said, "some inclusion is essential."