Alright, I've finished my first walkthrough of Zephras Isle, and found several lore objects. The story is quite solid, and I really like the lore. I'd like to say that I can see the main problem with the Skyborne.
The key triangle: High Elves, Void Elves, and Nightborne.
In my opinion, the best solution is create a hierarchy of larger races and their sub-races having their own unique looks, racial abilities, and assigned faction. It might also expand the pool of customization options since there would be both shared and sub-racial features.