• Dunmer inhabitants of Vvardenfel generally dislike foreigners, so there’s a base level of racism whenever the player interacts with them (even as a Dunmer yourself, you’re too cosmopolitan for them)
• Slavery (plantations and mines) is the driving economic force on Vvardenfel. There is extra racism when the player is a Khajit or Argonian
• Everyone lives under a stagnant theocracy
• One faction, the Telvanni, are powerful wizards who ignore the government and believe that might makes right

All of these mean that there’s a certain subset of players who are into this ancap racist stuff IRL and get excited by “roleplaying” Dunmer racism on Reddit threads and the like.

But for any normal person, these are just aspects of a setting that make for interesting conflict and stories. It’s such a great game, and OpenMW is the best way to play it.