Dwarf, they are badass. And theyr priests are allowed drinkin lorewise.
I play horde, but I spend 99% of the day with deviate fish because the female human casting animation is absolute win.
If I were to reroll I'd pick human female without a doubt. Not only is the casting animation my favorite, but their racials are pretty awesome for pve and pvp. [Not just the 3% spirit actually, don't overlook the use of having a pvp trinket at your disposal at all times in pve.]
I would say Human is not too great because even if Perception is useful to activate against Rogues, you don't really use Feedback.
Dwarf is generally the best decision - Fear Ward gives you a great way to stop those rampant Warlocks with their Skill Coils and Stoneform is great to remove Blind and get a nice window of immunity against Crippling Poison.
Of course, once Blizz announces what is going to be that mysterious new race in TBC, the outlook may change.
Shadowmeld was actually nerfed... guess a lot of people just see it as a nifty vanish and that's better without really looking at the main big change: You can no longer drink while in Shadowmeld.
Human, Why? bql second fear break go md, Festergut stops pucking, ldw if someone cc's you, pretty much it has its use's in icc.
For straight PvP, I'd go with Human...
Once you find out what they are doing for Cata., you can always race change if need be...
-Libertor's Armory!- "AGGRO" ~ LOOSELY TRANSLATED, IT MEANS "THE PRIEST DIES."
Hehe. Feedback was the Human racial spell. It was a buff on yourself that caused any spells cast on you to deal shadow damage back to the attacked and drain their mana. It was really, really situational, but if you timed it right it was strong. For instance Arcane Missiles would proc the drain/damage on every hit. So instead of 165 damage/mana burn it would be 825/825.
Fear Ward used to be the racial spell for Dwarf, which made Dwarf the default Priest race for Alliance, but Stoneform was also about 20x stronger. Partially because Rogues' Blind was considered a Poison at the time, so Stoneform functioned as a trinket against them.