I thought the Wizard Wars happened way before the Lord of Chaos started his campaigns. I remember one of the wizards in DKS saying that the Wizard Wars make the wars between The Divine One and Damned One seem like skirmishes but maybe he was referring to the current wars and not the wars where there was some manifestation of the Lord of Chaos on the battlefield. Reading the lengthy prologue to Divine Divinity (was it 28 pages or something? I can't remember), you see that the wars before DD were rather huge and all the races and their armies needed to join forces at one point to stop the Black Ring. In Divinity 2, only the humans stand fighting against the Black Ring and one man/woman contributes mostly to their efforts. Mind you, the humans were just barely hanging on before the DK shows up and it's only with the Eye of the Patriarch (or the other thing) that the DK is able to launch a counter attack.
I swear there was a mention of orcs in Divinity 2. Didn't those Black Ring members in the mining tower say that green skins (orcs) are constructing the flying fortresses? Or was it that they were slaves? Same thing I guess but that mention says they still exist.
Elves and dwarves seem to have faded LOTR style from the world. Realistically, I'd imagine the elves are simply very few along with the dwarves. They were already quite small in Divine Divinity wherein mostly humans ruled the lands that you saw. Hopefully Divinity 3 shows us what's happened to them.
I'm glad to see Dragon Commander is bringing back elves, dwarves and orcs though.