I've not played D&D in numerous yonks, but I always felt that the word 'Species' should have been used rather than 'Races'. Elves, Dwarves, Halflings snd Orcs etc are clearly not Human. For one thing, 'demi-humans' are limited in the classes they can belong to, unlike Humans.

There certainly is nothing in the rules stopping Human characters from being as diverse as you like. The player is free to choose the background and physical appearance of the character, their attitude, the way they talk, etc.

The moral dimension is, of course, central to the game - without it, there is no game.

I also admit that I always saw Tolkiens' selfish, quarrelsome, greedy, uncultured, undisciplined, violent Orcs as a harsh caricature of Americans!