No it isnt one dimensional.
Theres already humans.
you already have the moral dilemma with humans.
If all fantasy races are like Humans, it doenst make it more deep, it just takes away one more thing in the world.

If you make drow into Humans, then you sitll have demons who are, by definition in any mythology, evil and killing them is of absoluteley no consequence.
Does that mean only creatures that do not have offspring are evil?
Do you not realize that this takes AWAY the dilemma of killing the goblin children?
this takes away a factor in the worldbuilding and in the moral dilemma of a lawfull good paladin.

>Arguing about it
tbh this is why i like to codify it.
A lot of old fantasy writers were christians and thus their worlds had a christian world view.
So it was very easy to say what is and isnt good or evil since big religions tend to have very clear instructions (well, christianity does contradict itself more than other major religions do,btu you get the point)

likewise, if you define what consittues good or evil, within the boundries of your setting, then you have a set of rules to follow.
And THEN your players might say "But i think killing goblin kids is bad"
and then you got drama, Because god disagrees wtih you.

that stuff is great roleplaying if you ask me. better than morally grey "I can do whatever i want"