If you cannot select undead as race at the beginning, I have an idea (which is pure speculation and wishful thinking):
So undead is not a race because undead were a living human/elf/dwarf/lizard before. Maybe you start as a living creature and at some point of the game you have the option to become undead. When you get to that point, becoming undead seems to be the easy way to solve an importent problem, but you have to do a big sacrifice and later it turns out that being undead has some negative side effects.
Or maybe you have several ways to approach an important quest and if you fail some possible ways, you become undead as an surprizing consequence. (for example you try to sneak past a powerful necromancer (the game tells you that he is paranoid, sets tons of traps and hates intruders) and when he ctaches you he does his experiments on you)
PS: Elfs being cruel corpse eaters seems very strange to me, too.
Prof. Dr. Dr. Mad S. Tist
World leading expert of artificial stupidity.
Because there are too many people who work on artificial intelligence already