So in a way yeah, fuck yeah, At SOME point there's gonna be a certain amount of xenophobia.
While I see where you're coming from, D&D assumes a lot of that shit gets ignored from the start. You might have a neighbor who is a chain-smoking old hag with claw-like hands, but what if she ACTUALLY HAD CLAWS? In D&D people supposedly treat half-orcs like shit because of their heritage, but they still know what a half-orc is and deal with them regularly. I also haven't seen many DMs bother with racial prejudices in their campaigns for no other reason than they didn't want to distract from the story they wanted to tell (Which had nothing to do with racial prejudices). The racial differences and prejudices are no doubt used by
What you end up with is a world where xenophobia is very watered down, because it's not based on stupid prejudices, it's based on who REALLY WILL eat you. I'm visiting my GF in bumfuck West Virginia right now. Racism is obvious and very present. However it's because they're a bunch of fucking retarded rednecks, not because they ever had a tribe of African Americans raid their farms, raping women and killing men + children.
In D&D Orcs do that shit, and that's why people give Half-orcs a hard time.
Little farming communities in D&D also invite heavily-armed strangers into their home because they're MORE afraid of the shit that's been raiding their farms. Those heavily-armed strangers are adventurers, and they're officially "not the norm."
So if you had your daughter abducted by a bestial pig-faced motherfucker who smelled like a corpse, would you insist on finding someone "normal" looking to rescue her or would you recruit the first badass who looked willing? If some bastard with a dragon's head said "Hey man, I'll go kill that fucker and save your daughter, I'm a follower of Bahamut"
and you KNEW about Bahamut (because you're a citizen of the D&D world) AND this guy had a perfectly trustworthy-looking friend who vouched for him (Perhaps a bard you know who sings occasionally at your local bar), would you slam your door in his face just because he's not getting anywhere with the ladies?
Furthermore, in areas where certain races are available, they're also usually kind of common. Warforged in Eberron are not looked on with HUGE extra suspicion because they're common enough in Eberron. People may still be uncomfortable with them, but they know about them. Dragonborn are actually similar, because it's a religious thing and probably related to a nearby cult or temple of Bahamut. So while they may not be welcomed with open arms, people look at them and say "ewww another one of those Bahamut freaks that did that stupid egg ritual."
Mormons on the other hand... those get the door slammed in their face.
I really do see your point, and I think it's very valid especially if you're making PCs who are uglier than the villains, but at the same time D&D people aren't like real world people. They have different problems and are surrounded by much more varied other people, many of whom are hideously nasty bastards. It's just one of the speedbumps of making a world that's based on the real world while not being the real world.
I also think D&D people probably are better at judging people by their actions and not their race than real world people. Wizards engaged in a kind of idealism when they made the game. Women are generally considered perfectly equal to men, racial differences are biological rather than aesthetic, and people are judged based on real things that happen rather than just prejudices that formed out of nowhere (See: An orc tribe killed my parents, so now I'm uneasy around anything that resembles them).