What's the main problem with other cultures in fantasy worlds and games? That they're just like humans with a tweak or two.
Let me explain.
Elves, as everybody knows, are basically humans with a giant ego and pointy ears who live for a thousand years. They're impossibly stylish, intelligent, thin, strong, and advanced. They live in harmony with the natural world and are incredibly good at magic, but never advance their civilization past what could be easily sustained in their natural world.
What's wrong with that, you might ask? That sounds alright, and, judging by the number of elf fanboys and girls in existence, they're fairly popular.
What's wrong with it is that they're boring. Their main purpose in most games is to provide an example of how to do everything right, and how to be better than you at everything. That's it. Why can't you simply have humans who are better than you at everything, I'll never know. No, it's important that they be elves and not simply super-hippy humans.
As I was sitting in my philosophy of language class, I was spacing out and paying attention at the same time. My professor was talking about how our language necessarily changes the way we think about the world, pointing to such things that don't seemingly exist outside our own minds, like love, justice, and the like. It was then I realized that the basic problem with elves and dwarves is that they, basically, speak the same language as humans!
Now, you could say that the dwarf-runes and elf-script that people claim as the language of dwarves and elves is different. It's simply not true. That's just english, written funny. That's all it is, and it's absurd to think that by turning friend into a flowy script on a ring that you've invented a new language.
What is the solution? Make an actual language for dwarves and elves! Now, it's not actually necessary to literally create a language from the ground up, but it's certainly necessary for there to be a few things about them that humans simply can't understand, or that we find it very hard to understand.
For a good example of that, look at Warhammer Online's dwarvish grudges. To dwarves, every little thing must be avenged, no matter how petty. They keep track of these grudges in enormous tomes, where people write down all the people and places and monsters that have done them wrong, offended them, or acted rudely, so that their ancestors can carry out their grudges, in case they should die.
To most humans, this is absurd. And that's exactly the point! Dwarves take their grudges seriously, and when they try to explain the need for their grudge-books and long, long ancestral memories, humans sort of scoff and look the other way. Even without inventing a new word for it, suddenly dwarves are more than stumpy humans with beards and accents. They've gained a unique way of looking into the world that can't be broken down into mere human ideas. They've become their own seperate race, and isn't that the point of having non-humans in the first place?