Can different races crossbreed?

Answer: Yes, but it is rare...and often difficult due to cultural differences, etc. which is why you don't see it often. The lore team has informed me that there will be future quests/events that touch on this and other issues, such as love and marriage.
Okay, now we know there can be cross-breeding. But, we still aren't aware of a case of cross-breeding or the circumstances surrounding it.