None of what you say here does anything to counter the idea of DM as control freak. It seems to double down on it.
There aren’t only two options as you describe. A GM could let the players make their PCs and then use what the players have come up with to craft the lore of their world. The GM doesn’t have to decide all that stuff ahead of character creation. Or even ahead of actual play, for that matter.
You don't get it. I don't run games by RAW, ever.
Before the players make their PCs I come up with a series of rules around each PC-playable species*. I have (the equivalent of) species-based ASIs. I have separate age-height-weight ranges for each playable species. Each playable species has its own pantheon (Humans have several). Etc. And I simply don't want to do this for 35 different bloody species, and this - along with tradition - is a large part of why I keep the species list sharply curated.
* - most if not all of which have to be in place
before players start rolling/deciding their characters' species. Otherwise, players are rolling in the dark; for example if you decide to play a Tabaxi Fighter without knowing their species-based ASIs and I later decide Tabaxi get a Charisma boost and a Strength chop as their ASIs you ain't gonna be very happy.
And to add to the fun, as the setting is designed before the players get to it, I have different species be more or less available depending on where you are in the setting e.g. if you're in region XYZ Dwarf might not be chooseable as your species, you might have to roll for it on a species-abundance table (and the roll result is binding, so you risk getting something very not-Dwarf-like).
The other part of it is that it'd be a rare player indeed who would roll up a character and then wait 6-12 months to be able to play it; that being the 6-12 months I'd be spending on setting design. It's not just crafting the lore around the chosen species, it's designing the whole setting such that a) each of those species have a few suitable climatic/geographical areas to live in and b) they have enough contact with each other that there's enough recognition to allow a party of assorted species to function. When there's only 5 or 6 species this isn't too hard. When there's dozens, someone else can do it 'cause I ain't gonna.
And if all that makes me a control freak then >shrug< so be it.