Side quest spoilers from Stormblood.

Well, there is a sidequest where you can help a Garlean solder (hyur) hook up with a miqote.... they even mention 'the pitter patter of little feet'. So I assume they can interbreed.
THere is also a sidequest for a lala male and hyur female that met on the battlefield and are in love. No mention of children in that one, though.