Turalyon didn't laugh at a joke? Big red flag!!
Also, he wasn't racist against the Dracthyr, he was fair towards them. If he was racist he would have straight up sent them away from Stormwind.
Learn the Classic lore and you'll understand why Turalyon was fair towards them.
He doesn't even need to do all that to be a villain. He's already a villain in my opinion because he didn't laugh at a joke and he told the Spymaster to keep watch of the alien humanoid dragon species that just showed up demanding entrance into the city.