I don't think it should be completely avoided. It's only natural that eventually mixing will occur between races. It's unrealistic to expect every single race to be vehemently traditionalist forever. Especially when there will be major trading cities that will thus become a melting pot of cultures just like Baldur's Gate and many real life cities (Which don't always have segregated areas specifically for different cultures)
The mix of fantasy races can not be widely spreaded at all. Previous games, Divine Divinity & DOS2, have shown the right things, the relationship and diplomacy between different races, their own lands, and how everyone united before the great world dangers.
If an elf lives in the forest kingdom with a great affinity to nature and calling the human cities as Stone Jungle, with kin's memory and knowledge directly transferred via eating flesh during the burial ceremony(since DOS2). If the dwarf lives in the great halls under the mountains with specific structures, loves smithcraft, and has great respect and dedication to the family & folk. If the lizard lives as a part of great House in Ancient Empire in the southlands and likes the hot weather more, or swamps(Divine Divinity). What's the point to live in human city for other races? Temporally for trade? - Yes. Specific place, such as Arx with religious significance? - Possibly. Embassy? - Yes. Stranger, assassin, spy? - Yes. Provide an assistance during some cataclysm? - Possibly.
I wanted to say, A small amount of mixing is possible, but this is very rare for fantasy world with different races. Even in our "golden" medieval times, people had very closed society, and the big cities had the national quarters. In the fantasy setting we're talking about completely different races, not about nations of human race.
Imagine the Tolkien' or Warhammer Fantasy elves/dwarves will go to live in the first dirty puddle in human' town... This is awful to even think about. The Divinity races are based on classic fantasy, and the previous Divinity games showed the fantasy races in the right way.
I'm only for the right presentation of Fantasy world with different races.
