IMO, there are a few different answers for this. The best way to handle it is to play with people who are similarly-minded and to set expectations before the character creation even happens.
1) Silly Characters - We don't allow silly/ridiculous characters. These are usually made by players whose main joy is to self-destruct campaigns. By group agreement, we're not running a comedy game, so, if the player who once made a halfling monk/chef, who used spoons as a monk weapon, and would constantly blow off the plot to go in search of more recipes hadn't left the group, I would have asked him to change his character.
2) Missing Races - The DM decides on the campaign, and the players usually know what they're getting into, because they always have to sign off on it before the game starts, in our group. So they know that such-and-such race doesn't exist. As long as clear expectations are set, it isn't an issue. However, compromise can be reached.
IMC, halflings are gone, killed off in the Great Apocalypse. They either died, or bred into the human cultures, to the point that one of the modern kingdoms has some qualities informed by the halfling outlook. If a player had wanted to play one for mechanical reasons, I would have let him play one re-skinned as a smallish human with "Quickling Blood".
3) Kender - There are some races that are abominations, IMO tailor-made for players who like nothing better than to self-destruct campaigns. Among these are tinker gnomes, kender, and gully dwarves. I ban them, and on the occasions that I play, won't play in a game that has them. Needless to say, I'll never be playing in a Dragonlance game.
4) Obsessions - There are sometimes some players who are so attached to a concept, they can't even play a character that lacks it. My main experience with this is furries. Some of them won't play a character that doesn't have some shapeshifting power.
In these cases, I find the best thing to do is shunt them into something that's pretty cool and make them play with the existing fluff around that race/class's niche in the world, thus making them branch out, avoiding playing the same character every time without the player feeling pinched by it. In FR 3.5 there were the lycanthrope Silverstars of Selune, in Eberron there's shifters, and there's always the idea of playing the Drizzt of the Gnoll world, or even a rakshasa that's a reskinned shifter or something like that.