HAHA my good fellow Rpg'ers... i recall having a reasonably potent high elf in ad&d, Multi-class fighter(7)Mage (7)thief(6), but could it live with the dual-classed half-elves or humans, or worse still, the pure level human rangers or fighters ... NOPE!
I just couldnt follow TSR's reasoning on all of the points that Val & Grondy have just raised, if it was the case that it was justified b/c non-human races started with stat bonuses @ 1st level, but had all these bizarre counter-intuitive level restrictions later on... All i know is that i played some good characters with some good mates in AD&D (Spelljammer, Ravenloft, Forgotten Realms & Dragonlance) but none of us could bear the system. Eventually we adopted the GURPS system, but even that had its limitations.
Rolemaster has to be one of my personal faves though, and like you said Val, I think the makers of the game were themselves troubled by ill-conceived preconceptions, and were more intent on maintaining game (player) balance than accurately representing all the races properly. E.g, i remember on many occasions there being too many Elves in the PC groups, and virtually no-one had the courage to be the relatively runt-like humans.
On the point f the Sidhe, or Tuatha De Danaan, as a celt myself (Welsh/Oirish stock) the Sidhe traditionally are primaeval nature spirits, and have a variety of forms - the most common being a pixie-like, elfin creature in popular mythology. But this is also a very recent dumbing down of what they actually represented, equally they were as gigantic as they were small, as fair as they were ugly, alien and yet possessed of human traits when it suited them. In, addition to that is the close similarity between the Valar of the Undying Lands and the Tuatha de Danaan of Elysium, i'm sure JRR cited local Brythonic Celt lore and mythos as well as the much vaunted Scandinavian legends (Grendel, Beowulf, Sagas blah dee blah).