Now the problem here, in a videogame, should be small racial differences? Personally, I would really feel satisfied, playing as a warrior Lalafell, winning in an arena match an highlander with my same job ... It would be more difficult, more interesting ... more epic.
As a Warrior Lalafell, I find this offensive. I don't walk into a fight thinking this will be epic because I'm a Lalafell and I'm auto-weaker. I want the enemy to get stronger so I can get stronger. Throwing a race-based handicap does not make it worth the extra effort, it makes me annoyed and frustrated.