The main reason one picks the Lizard race is for the Lizard attributes. When you talk to people you gain the "Lizard" options in conversations. You also have the ability to "dig" without using a shovel.
However if you are the only undead in the party then halfway through Act 1 you should have picked up The Mask(Dun dun duuunnnnnn) and that completely overturns any and all thoughts about Undead racial traits because holy crap is the Mask broken as hell on an undead. You gain a huge amount of flexibility in fights in exchange for giving up your helmet slot, and I whole heartedly find the Lizard form's fire breath useful.
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BTW in regard to your side note a lot of people recognize you're undead even while fully garbed, and of course I'd expect wild animals can as well due to the whole smell of death that exudes from you.
Besides it's probably a balancing or coding issue where it would've complicated things and made Undead possibly too powerful.
