So... Au Ra really don't "fit" into the story well, as playable characters

[Ashkendor]

it is many times hinted at you hail from lands unknown, and many NPC's will address you as a foreigner to any of the nations.

I seem to remember the opening cutscene for brand-new characters saying outright that you come from "a distant land".

As far as race changing, I just sort of tend to shrug and handwave that one. Race changing is a gameplay mechanic that exists for the convenience and happiness of players on a level outside that of the game's storyline. It's easier for me to assume that either 1) Fantasia has no real canon effects and exists only as such a mechanic or 2) if Fantasia IS canon, it adjusts how people see you in both the past and the present. I race changed from a female Miqo'te to a male Au Ra, which should be a jarring change for NPC's but of course they don't notice a thing. It seems like as far as they are concerned I was always eight feet tall and covered in scales rather than a five foot nothing catgirl (or even the catboy I started as).