(Reviving in name of Chaos and Flame)
Great to see that my thread has had nice discussion!
But, even Larian admitted it's a bit of a plothole. But since the only thing I've met about Elves was a description on an item (or two?), that made no sense (Elves died long ago? Uh, that's impossible, unless you call long ago a few years/months long ago, which is when Damian came back?), then it would be easy to just remove the offending description in a patch and give us back Elves in Divinity 3. Because, nobody said a word about it, even Zandalor (knowing the wizard from Divine Divinity, if Elves/Dwarves truly died altogether, he'd make a comment like "Hopefully Dragon Knights won't share the fate of poor Elves, extinct and slowly forgotten."), there's no book like "History of extinct races" with Elves in part XXX, or something.
Darn, it would be great if we had to make the council again in D3, or if we were a part of it. Hopefully we won't play Dragon Knight again - that would be horrible. It was great to meet the Divine One and see how much he has changed. It would be great if when meeting Dragon Knight, he'd keep the sarcasm and sharp responses he has shown not once in Divinity 2, but paired with wisdom (unless Divinity 3 action wasn't that far from Divinity 2, then he can remain as he is).
And it would be great if they made romance options. There was one in Divine Divinity (and even an option of gay sex in brothel! Great, more choices = better rpg) and currently all damn rpg's have one, usually for all sexes and sexualities (Shepard is an exception, his homo romances were cut off the game

).