I'd probably take a different approach:
Keep existing racials, but let yourself pick any race's set of racials of your faction, on the condition that your character starts where they do as if your character was raised there (or goes there after the new 1-10 zone). That way, racials are given to a character based on where they were raised and maybe not necessarily on their biology. Tauren raised by Trolls? He can Berserk. Orc raised by Undead? He Cannibalizes. Lots of combinations, lots of potential for fun RP potential and just player customization in general while also giving players freedom and also the option to play what they want to look like while still being optimal if that's what they want.