This follows the same spirit set forth in my
Metagods post. Like those, these are variables which define a setting of mine. You pick a set, change some things around, and see what comes out. Theoretically, that would be a setting I would make and enjoy. Think of it like Magic the Gathering planes. You have some things which are constant (5 colors of mana, for instance). Then you pick, choose, and remix creature types, local forces, geography, etc. and you have a Magic plane!
The important thing is to think out the consequences of the variables you are choosing. I'll give an example setting at the end of this post. Maybe more metasetting stuff to come!
The List
Humans
The rice of races. If you include them, its normally cool to choose certain things they are comparatively weirdly good at. Perennial favorites include: Religion, Breeding, Cooking, Orating, Farming etc. Develop humans as much as other races and make them just as big of mythic weirdos. I often like humans to be foreigners. Also its fun to have them just have pointy ears or colorful skin just because.
Fauns
Cooler than elves. Can't wear boots. Normally chill pastoralists, range from minor god weirdos to shire-dwelling farmers. If you must give them physiological abilities, they might be good at climbing (don't give them headbutt attacks that's really dumb). Other abilities vary by characterization.
Nymphs & Fairies
This one overlaps a lot with some of the others on this list. You're going to have to determine on a case-by-case basis what it actually means. Also cooler than elves
Elementals
Some very lame people would call these genasi. Normally consisting of Sylphs, Undines, (choose a fire one), (choose an earth one). I say this because it seems like people (including me) don't really like the names "salamander" and "gnome". Fire boys include: ifrit, flamekin, etc. Earth boys include: dwarf, kobold, etc. Sylph is also a cooler elf. Sometimes fun to have them have element hair (cloud hair, water hair, fire hair. Earth hair doesn't really work I dunno)
Skeletons
Either very quiet dreaming dead, or skeletor. There is no in between. Having any flesh on them makes them less cool, make sure you remember that. For some reason really fun to play around with government systems with these guys. Skeleton kings, skeleton parliaments, skeleton theocracies, etc. Just having skeletons makes politics fun.
Little Guys
Or Folk, in hypogeum. Just some weird little guys. Goblins, Gnomes, Kobolds, Halflings etc. are lame but if you throw them in a pot and mix 'em up you can get something cool. Waddle-Dees, Toads, Shy guys, to a lesser extent Minecraft Villagers. Just some pretty odd little guys. They run shops or wander around the woods or form cave tribes or whatever. This is a vibe based race.
Magic Guys
Made of magic, sort of amorphous. Wizrobes, Black Mages, also Shy-Guys, Novakids, Spell-Born homunculi, could probably also encompass weird godlings. "Why aren't they better at magic than humans" shut up they need to keep their magic to maintain their bodies. Might also be Weird Little Guys.
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I made this one
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Cat Boys
Also in Hypogeum. Not furries, but can get close. Furries or normal beastfolk are lame. These ones are just humans but fuzzy. Have weird ears (where humans have ears! not on top of their heads, that's gross). Not actually cat-related, I just think its funny.
Sheepfolk, Frogfolk, Bugfolk, Mousefolk
The exceptions to the beastfolk are lame rule. Obviously distinct, but grouped for simplicity. Don't call them "x-folk", give them each distinct and folk-lore-y names. You can also make beastfolk not lame by making them Weird Little Guys. I like little guy beastfolk that are incongruously from victorian to edwardian times. The sorts that wear little suits or coveralls or quilt dresses and for some reason the rabbit is neighbors with the fox.
Cyclopes
Human sized. Sometimes cool.
You Can't Play Them But They're Here
Proper Fairies and Elves
Angels
Demons
Angel and Demon descended people
Aliens and Gods
I lied you can play some of those sometimes
Remember, the principle is pick a few and remix. The other principle is "would this game feel incomplete if the only available race was x?" if the answer is yes, Bad! Examples of bad-uns: Shadar-Kai, Elves but only the stereotype, Dwarves in general, actually I don't know if those are bad but I don't like to include them. Words for Yellow also has some good races. If you have good races, comment below, and I'll tell you they're bad maybe.
Setting: The Green Kingdom
The Green Kingdom is a small region, a watershed on the southern sea rimmed by mountains. The circular cities are the homes of the humans, who take pride in making clothes. The country is inhabited by both humans and fauns, who work the land together. The wild and deep places are the homes of the cyclopes (known for their magic) and living skeletons. Living skeletons also inhabit necropoli inside the cities, but humans don't enter those districts (they are quite unnerving!).
The Green Kingdom is ruled by the Green King, a man called Basil. The duties of the Green King are mostly in directing building projects and adjudicating disputes. Local priests honor idols, great and small, collect taxes, and distribute food. The Princes, regional rulers, organize armies when the need arises (and otherwise do fuck-all). Most wars are internal rebellions, but these are not large (oftentimes they arise over badly judged disputes, with ransom and cattle stealing being the biggest tactics).
Dangers arise from bandits in the woods (often a mix of races), cyclopes sorcerers, territorial skeletons, dragons, sphinxes, and forgotten or malign spirits. It is said cyclopes worship shadowy gods of magic, and can summon strange celestial spirits or evil bogeys (they are respected, and sometimes feared, but only rarely hated). Fauns are only occasionally dangerous, when driven by passion, but otherwise they might cause problems by being lazy or pushy. Idols which are neglected, or spirits for whom an idol was never made, may become wrathful and bring curses or attack people (fauns take pride in honoring idols deep in the wilderness).
Dungeons and other ruins are often inhabited by Skeletons and Cyclopes but one can enter if one is courteous. Often there are unexplored portions or dangerous monsters that even skeletons fear, so it can still be lucrative to explore them. Cyclopes don't kill monsters with their magic for fear of the wrath of their gods, but they will often reward adventurers who do (whether with treasure or magic. Many successful people have a spectral attendant, a gift from a cyclopes).
(Races: Humans, Fauns, Skeletons, Cyclopes)
(Metagods: Idols, Darkness)
Conclusion
Normally, these settings just detail one, maybe 2 small kingdoms and vaguely talk about their neighbors. This is great, because it leaves open the possibility of having other races if, for instance, you have a rotating cast of characters, flailsnails style. Also, the world is mysterious. Lord of the Rings focused on 3 kingdoms (the North, Gondor, and Rohan) and 4 races (hobbits, men, elves, and dwarves). Other kingdoms were mentioned, but not described. Other races were included, but were unknowns. What does the East look like? How do the southrons live? We don't know, because we were focused on the tight group of cultures which were almost folkloric blank slates to start with. Resist always the urge to include everything and the kitchen sink, but you can lean into the known and the cool.
Possible future metasetting posts: geography and features, Monsters, Magic, Factions and Politics, other dimensions.