Battle-born, since I support the Empire (if having to choose between Empire/Ulfric). However I have very little interest in either family, let them solve their own problems.
Wow, that's harsh. Can't believe a nation like Norway would have such a problem. But then again, it's not in the EU... I recommend you cross the border to Finland!
Single species, you mean? Major classifications like Black and White are races, classifications like Russian and Han Chinese are ethnicities. Racism occurs in both classifications: the White Nationalist movement for one does not make difference between German and Russian and concentrate their hatred on people of different skin pigmentation, while for example Nazis showed little interest in other races and focused on tormenting people of other white European ethnicities if they happened on their way (Slavs, mostly).
That said I personally would classify Men, Mer, Argonian and Khajiit as species while Bosmer, Redguard etc. are Races. Ethnicities do not appear in Tamriel, as all members of each race apparently have identical genetics sans their phenotype.
EDIT: Come to think of it, it's a lot more complicated than I thought... Scientific classification of species is that the two compared units cannot produce fertile offspring... Everyone in Tamriel is apparently capable of it except the Beasts. But then there's the whole "mother decides it all" genetics..... Sigh, that's what I get for applying real life science to games.
Calling other ethnicity a "different species" is a very slippery and fast path to social Darwinism, which is a very dark definition. Ethnicity can be used in a multitude of ways, but is primary the method used in discerning the ancestral background of a particular group of individual, such as Caucasian, African, etc. Neanderthal and Cro Magnum would be considered another species from our Homo Sapien, but not black or white who both belong to the same species. Racism is the belief that one group has an inheritance superiority over another though birth traits. Ironically, by definition, this is true in TES games. Each group has their own special powers, such as the Imperials +5 to longsword, that the High elves do not have. However, saying one family is better than another is not racism in the Gray mane/Battle Born case. Even saying the Nords could beat the Wood Elves into a stupor in a brawl is not technical racism, as Wood Elves are simply an ethnicity of the Elven Race. "Seen any elves?" would be a racist statement, however as you point out this is a game, and that royalty complicates things.
Overall, i think people are far too sensitive and spam the word racist over everything. It's a game and people need to lighten up. I don't play the Kajeet or Argonians because they are not my style, and yet i am called (quite maliciously) a racist. I think the whole racist word needs to be bleeped, as it is irrelevant to TES as no one is Human to begin with, and racist is a Humanly specific term.