I figure most battles happend before the mist decended, when the land was much more populated than now. Then the mist came an isolated all the towns and villages, but they keept telling the stories over and over again. And as stories do, they grew into these fantastical wars, and the opposite side became more and more demonized with each telling. So most of the racist trends are based on extreme exaguarations.I am curious how this has been rationalised by other players, where were these battles/wars fought and by whom?
Then of course, during the time of the mist, occasionally a towns crops might have failed, and facing starvatin they set out into the mist to find food, perhaps by raiding other towns they came across. For some travel seems to have been possible during the mist, but incredibly risky. These raids of course inflated the hostility even more! You've heard these stories about how horrible the orcs are all you life, and then all of a sudden out of the deadly mist comes a hoard of them and steals what little food you have!
Then the mist lifts, and five years passes which should be just enough time that some people start realizing that maybe orcs and dwarfs and humans and elves aren't all that bad, besides now everyone needs something and most settlements probably don't have enough people to raid, so trade between old enemies is more or less a neccesity. But five years shouldn't be enought time to sway the generall opinion, just to soften it ever so lightly. So old tensions are still there.