It's both, actually.
Xenophobia is their refusal to assist foreigners unless their magical invisible tree friends say so. The main scenario quest goes into this in detail.
Racism is demonstrated in the Lancer and Archer guild quests -- respectively, the lack of trust offered to Duskwights, and the view of Moon Keepers as ignorant savages (and both quest stories have these prejudices coming back to bite them in the ass)
I've said it before, I'll say it again: Lominsa has no undercurrent of something shady going on. All shady business is conducted in the bright sunlight! What you see is what you get.
Gridania's less-savory elements are borne primarily of culturally ingrained hostility towards outsiders. Ul'dah, though...just, Ul'dah's got problems man.
