I guess it's fair to start off by saying that, yes, there is likely to be genetic differences between races the same way there will be genetic differences between individual people. However, even people within a race show great variety in ability despite being from the same race...or even the same family. If the father is Albert Einstein, does that mean the son will have the same type of individual strengths? Does that mean the family will? Are all the people in your family similarly talented in a particular set of natural gifts, or is there variety? In the end, the difference in the genetics of races is negligible. The fallacy usually comes from a sort of deluded self-image. Particular people within a race have done certain things and other people from that race sort of adopt the same achievements for themselves. If a Chinese person discovered astronomy, the tendency for some is to state that the Chinese invented astronomy rather than certain individuals while the broad majority of Chinese at the time might not even be able to read. Doesn't mean they couldn't read. Doesn't mean they are naturally less intelligent. It's just how things turned out.
In video games, races have specific strengths and weaknesses. It could be said that this was from the approach of a game where races are just pieces and your creating an arena where a person contrasts with different adversities in their environment, but...these differences tend to be markedly similar to cultural stereotypes. I don't think I even have to mention them- you likely know exactly what I mean. For one, the fairer the race, the more exalted the bio and abilities. The darker, the more primal. The fairer race tend to have the best countries and such. The darker live primally and may even be beast races. The beast races tend to have ethnic accents. The nobles...the Imperials...mostly European accents.
If anything, the only real difference seems to be culture and physiological differences like tolerances to heat or cold, tolerances to certain foods, etc. Also, these tolerances are not really static in that they remain without waver. Rather, a person born to a certain place adapts to it. Children adapt far quicker than adults and so being born in a certain locale would make- say- a person in the high-elevation areas adapt to low oxygen environments. A person born in a cold region can endure the cold better than someone born in a more moderate region. However, should that person move from the cold region to, say, a tropical one for years, upon returning they will probably not be able to tolerate the cold as well as they could because the conditioning to ones environment is not static and changes when the environment changes. It's not a difference in race, but a difference in environment.
The last note is that people often attribute proof of racial distinction based on actions. If this civilization did so much and this so little, this is proof of genetic distinction in things like intelligence. Let's take Greece. For a time they are considered by western historians as one of the most intellectually advanced civ's of their time. Where are they now? Taking a look at them today, with the argument mentioned, how could they possibly be more intelligent than the US, China, Britain, etc. What about Rome? What about Egypt? What about about Sumeria? What of the former apex civilizations who likely, each, claim that they were the greatest in the world- either naturally or God-chosen?
How would I fix the handling of race in fiction? Simple. I don't pay attention to the race. It's not that I don't see race, but it's irrelevant. What you are looking at is not a difference in race, it is culture. A difference in culture does not hard-code attributes to races, but shows the way actions and thoughts and ideas affect people and shape them into what they are. Even then, simply because one belongs to a culture does not mean they behave uniformly though there is always instances where the herd-mentality applies. People are like photons. They can behave like individual photons and they can behave like waves of photons. At one point we have our own individual ideas on a subject and at another we are throwing our lot in with A vs B or vice versa.
This is my opinion on the matter, but there is a reductionist view of races that attempts to categorize them into simple to handle memes. But people are obviously more complicated and varied than that. You see this in your home and your class and your workplace. People are very varied. Race does not affect behavior so much as the outlook of ones race and others does.
However...what might be more controversial is the distinction between men and women. While I can't say that there would be much in the way of mental distinctions based purely on sex, the problem is that nothing is an island unto itself and the factual physical differences do affect parts of the mental and emotional (or psychological) generalities between men and women. These are very small, in a way, but as you know me, I tend to think the subtle and overlooked have much greater roles to play than we think. But that's another post...
Conclusion: politics invades fiction and arrives at such distinctions as bloodlines and the like for many reasons. It's a simple device. It's recognizable. But also because it is how they view things consciously or subconsciously. You might be thinking I'm calling for people to stop this in some sort of rules for the arts bid, but that's not it. I think the only real change in a person must be made willingly by that person. No matter how difficult, if you wish for someones idea or image of you to change, you must behave in a way such that the person could not project such an image of you and be taken seriously. Well...that's awfully simplistic as well, right? I mean, if you deliberately set out to falsify and image, you can do this in any number of ways and people will think so bad of you that it can cause a mental breakdown or something. It would be like the worker who thinks all he needs to do is do a good job and his actions will speak for themselves- no matter what people say about him. Life...is not easy I suppose.
Either way, that's my bid on race and fiction. The conveniences of entrenching this outlook comes at the cost of entrenching a false perspective that nonetheless sticks with a person subconsciously and colors their world-view. I don't think books or stories have some moral duty to them, myself, but others who write these things claim that's what they are doing and reading their works, they clearly have a "this is what good guys do" sort of thing going on where the good guys have a particular set of habits, thoughts, and views that mark them as such. Therefore, if the main and popular character treats woman like crap...what do you think happens in society?
Writing does matter. Even fiction.