Hmm. normally I would also belong to the crowd that advocates for distinct racial differences, otherwise, why have races at all? But, considering that the game already allows us to create drow with the fairest skin on earth and almost any hair and eye color we could wish for, which definitely goes against lore, I see no reason for why someone shouldn't be able to also give elves a beard, or shave a dwarf. That said, it should, like the extra skin colors, be a drop down option or a box to tick so that players know that it doesn't belong to the lore friendly versions of characteristics.
