Well, to delve into the history of the matter is quite a thing, but a big part of what you're mentioning has to do with the fact of bad storytelling... Quite honestly, computer games lack any great story writing, and hence they fall back on the common great fantasy stories and settings...

One that comes to my mind, that fits pretty easily into your observations is Lord of the Rings... Really the original fantasy story, and generally where the common perspective of elves and dwarves comes from. Lord of the Rings indeed was a land in which humans were the dominate species, it's part of the world and history, it was the dawning of the age of man, and the wane of the other races. Tolkien's stories were fairytales, and in essence were meant to be seen as the truth, like a myth or a legend... you are meant to see middle earth as a place that could have existed in reality, and I think the fact that all the other races were leaving was a way to make it more akin to our reality, just like there are legends of dragons, goblins, vampires etc... elves and dwarves are just as plausible.

As far as the racism etc, it's just a speculation that as we have a racism over someone skin colour, having multiple intelligent species (cause that's what they are) would cause even more prominent prejudice. Many stories see race as a big hurdle for people to overcome, and in many cases they may use the prejudice of elves as a proxy for our own racism, to explore the topic without making it about the topic.. many stories do that for many different topics that are hard to talk about head-on.

As far as starting wars and enslaving other races... again I'd say it falls back on good 'ol Tolkien, and his concept of the races... Tolkien saw each goodly race (Elves, Dwarves, and Humans... lets leave hobbits out of this one) as having it's own benefits... Elves and Dwarves are two opposite lifestyles, to compare it to the real world.. elves would be considered the religious, they trust in a higher power... and are creative and such... Dwarves are industrious, and rely on themselves and their own... humans are in the middle, and can be anywhere.. as a race, they are free to do as they wish, which... in Lord of the Rings... makes them powerful... It is also said that due to a humans mortality, they are more motivated to preform great things... there's lots of talk of it in the books, and i recommend reading em all, because they are great

long story short, i find videogames to be VERY lacking in story, characters, and everything else.... beyond the very basics of storytelling... creativity is unfortunately something that is very lacking in all but the oldest of games, most of todays games regurgitate a story, movie, or older game and only change a few things to give it a new spin.