Claudio Pozas; how could I forget? Yes, my orcs would look quite a bit like Claudio's half-orcs, actually. muthusmage and Filby; great stuff there. I had also given some similar thoughts to a setting that I never actually ran, or even developed very far. I was going to use Neandertals as orcs themselves, though -- the robust build and relatively coarse features already suggested orcs to me. The elves were a type of Fey that came from Outside, and were thus not closely related to orcs or humans. Most of the other demihumans were going to be cut from the setting.
My idea was that the world was still in a primitive Stone Age/Ice Age culture when elves arrived with class faerytale trappings. Exposure to them brought a degree of higher culture as well as knowledge of ironworking, stone building, and agriculture. Humans in particular were to prove remarkably adaptable; picking up quickly on the elves' style of life, although beyond their young kingdoms the land would be very wild and savage.
Anyway, good stuff, you guys!