Don't know if I will be blasted for this or not, but....
If you want a good example of fiction where multiple sentient species are stuck in one small area and how they actually do get along (relatively speaking) read one of the Laurell Hamilton books (either anita blake or merry gentry). Most of the fantasy races can be found in that series and yes they do suffer prejudice but they, overall, do get along. This idea that just because we as western europeans have some problem with ethnocentricity does not gurantee a fantasy society would. Why are we racist? Many would say it is a fear of the unknown. Historically speaking we have grown up with only our own cultural/ethno variety, it wasn't until the last 100-200 years (a very short span historically) that we have been faced with true cosmopolitan existance (It could be said that certain cultures have dealt with it before and I agree, I am only talking about global cosmopolitan right now). In most fantasy settings, the races have been face to face for 1000s of years. Let's be honest, you either learn to get along or you cause genocide (in most fantasy settings there's a little bit of both, sounds realistic to me). You band together with those races that are as similar to you as you can (Human, elf, gnome, dwarf, halfling) and drive off those who aren't as close (orc, goblin, minotaur, etc). Look at most fantasy settings; the older races are usually very racist (the elves) while the newer races aren't as much (Human) because, I think, they have had more generations to get used to the idea of multiple races working together.
my two cents