I wouldn't get rid of the rule entirely, but I might consider changing which favoured class is applicable to which race; especially if playing in a non-traditional D&D campaign.
I think dropping the rule entirely nullifies the advantage that the rule is supposed to give to humans and half-elves.
Use as written. Having said that though there is room for home-brewed races (or variations on the standard races) that would cause (or at least lean towrds) changing their vafovored class.
For example in the d20 Birthright rules we are working on at Birthright.net the elves in the setting are drastically different than are the standard PHB elves. They live forever, have no gods and can cast greater magic (non-illusion/divination style) without being blooded (long story, suffice it to say that the old gods died and spilt their blood on the mortals that fought on their sides - these mortals gained a portion of the divinity and this allows non-elven characters to be able to wield the greter magics). Elves also invented bardic study and song spells. So in that setting we made elves favored class any 1 arcane caster class (chosen once a level is picked).
In Dark Sun the Athasian elves also differ greatly from the PHB elf. IIRC the Athas.org treatment made their favored class rogue.
But it comes down to how races are played in a setting - favored clases make a tremendous flavor addition to a setting.
If a player tries to munchkinize a character with too many classes, I'll just talk to him/her, but once you remove most of the prestige classes, you quickly find that too many classes usually results in a weak character.
I can't even mock this. It's too wide open. Oh, I know:
"Once we remove all the non-fighter classes, we quickly find that higher leveled characters are stronger than lower leveled characters."
"Once we remove all ranged weapons and all melee weapons except for spoons, we find that fighter melee damage output is no longer so overpowered compared to mage output."
"Once we remove all armor from existence, we find that the dexterity score matters more."
Previously I just changed the preferred classes around, very few of my players multiclassed so it was mostly just a guideline to what races specailized in. Its imporance was in finding high level NPCs and the shape of cultures.
I switched worlds and now I have a gray elf thief4/ftr1, a Barb1/Ranger1/Spirit Shaman3 and a halfling Monk4/cleric1 all are intresting characters and so we changed the rules to allow everyone to multiclass like humans.
In my campaign, I have seventeen starting classes I'm using from different sources. I felt keeping favored classes to just what was in the core was restricting. So what I did was keep favored classes, but gave each non-human race three classes to choose from as their favored, and once chosen, that class is that character's only favored class.