The way they established the setting in 2nd edition to tie it into the rest was that Mystara was part of the great wheel, but Immortals (ascended mortals that replaced the role of gods, and there were mechanical differences between gods nad immortals) did not want outside powers to influence The Mortals. This is because Immortals needed mortals to ascend to keep the Immortals relevant. If gods or demon Lords presented another option The Immortals would lose power.Tieflings in Mystara are something of a weird case.
They originated in Planescape, and in the 2e days, were more or less planar. Now Planescape and Mystara coexisted as supported 2e settings for 2 years, and Planescape counted Mystara as part of its cosmology. So a tiefling could theoretically cross from Planescape into Mystara. Mystara though had its own weird cosmology, but it was really only talked about in the old D&D rules. The D&D cosmology was similar with a Prime (Material) Plane, 4 elemental planes, an Astral and Ethereal. Outer Planes were much different, there was no Great Wheel, and they tended to be individual realms of the gods, connected to the Spheres, or alternate realities or something, I don't really remember. In any case, a traditional Mystara DM might use the old cosmology rather than the Great Wheel, and that might make tieflings a difficult fit at best. Not only that, but the DM might not like Planescape at all and not want to use it in his game. That was one of the big downsides to all of 2e's settings.
Mystara had several crossovers with Sigil, the best known was a shadow elf that was physically split onto multiple forms to spy on all the factions at the same time. Immortals kept out Devils and Angels, and demons, gith and other malevolent outsiders had to sneak in or brute force their way in with the Immortals actively trying to keep at bay.
Interbreeding worked differently, as orcs were descended from beastmen, and weren't capable of breeding with humans or demihumans. All the beastmen races could freely interbreed. Demihumans and humans could interbreed but they resembled one parent or the other rather than a hybrid. The other parent's heritage stayed on as a kind of recessive trait, two if two humans with dwarf ancestry had a kid there was a good chance their kid was a dwarf instead of a human.