It isn’t at all arbitrary. It’s a logical distinction. “Created by an evil power source” isn’t particularly compelling unless you make the creation story of “good” races into untrue myths, or restrict their alignments as well.
Orcs are aggressive, clannish, and have a harder time than most humans controlling their anger. That largely comes from Gruumsh, in my worlds. In Eberron, it’s just a result of them being very passionate, and scholarly orcs aren’t physically aggressive but instead are a pain to get in an argument with, etc. Peer review from an Orc Sage is...not gentle.
Gnolls, I do prefer older lore where the demon prince is an interloper, but I don’t change their origins in published worlds. So, in FR, I stick with the canon of every previous edition, where their origins/demonic influence makes them have impulses toward violence and predation, but they can choose to gather in groups that fight that impulse (I borrow from the philosophical ideal of jihad as the struggle against the sinful self, or in this case against the demon within, a lot for Gnolls and Minotaurs in FR) and keep each other level and away from “the demon within”.
Devils and demons, however, weren’t created by an evil power, they are a fundamental, and fundamentally evil, part of the universe. They aren’t natural creatures. They don’t procreate. They are elementals in all but name/game mechanical “creAture type”, of the Lawful Evil and Chaotic Evil types. When Grazzt went to the abyss and joined team demon, he became a demon. His nature changed. When Zariel fell she became a devil. None of these creatures are races. They aren’t even “living” by the natural definition of the term.
Orcs arent Elemental, they are a race.
calling that distinction “arbitrary” seems totally bonkers, to me. It’s like saying that distinguishing between stones and dogs is arbitrary.
We just draw the lines differently, but we are both drawing lines. I don't think something having a label of "fiend" makes it any more or less inherently evil.
It's a trope of D&D that there are monsters. If you are an X you are evil.
Have a good one!