Firor said that when you face an enemy in PvP, he wants it to be clear by their appearance who they are and where they come from (paraphrasing here). This is a notion taken directly from DAoC, but I don't believe that it's benefits outweigh the negative aspects. Yes, in DAoC it was extreme easy to tell you were fighting Hibernians by looking at Lurikeens and Firbolgs, even at a distance. And it did add to the feeling of faction solidarity and pride, too. Taking down those annoying little 'Keens was always great.
The negative aspects for ESO are too great, though. Race locking gives us only three choices per alliance., with very little lore to expand in the future. DAoC started with 4 and had an entire mythology to draw from,. They currently have seven races each. Also, TES fans are very much accustomed to picking whichever race they wish, with no worry worry about where it will place them. There has already been uproar in our very small community here so far on these forums.
In combat, there are many other possibilities for large groups to discern themselves. Nameplates not being the least of them. Not to mention that the races themselves are much more humanoid in TES than the differences you have in DAoC. Lurikeen, Inconnu and Dwarf vs Firbolg, Minotaurs or Trolls. And yes TES has beast races of course, but they're not as radically different than they are in DAoC.
Race restrictions should be removed, but keep faction locks.