Why not just allow characters to be customized to be different races, but then allow them to develop different skillsets depending on which areas they spend time in and on which weapon, crafting, etc. skills they spend time developing, so that (for example) an Asian character could conceivably "grow up" in the North, adopting the culture of the Nords despite being ethnically Eastern? And if a lot of people are worried about too many people breaking realism and immersion by living in areas and using equipment that are not traditional for their characters' ethnicities, each character could automatically start out in the geographic area that corresponds to its race, making it more difficult for people to travel to areas not traditionally inhabited by their characters' races.