I agree, having every race able to be anything, the game gets a little messed. I like the idea, but I don't think it makes much sense really, as said above, dwarves aren't much for mages.... It doesn't work well for them. They can, but they are naturally non-magical.... Forging aside of course.
Paladins are indeed from the human point of view. An elf isn't as ready to toss away some 500 years of life for the potential to maybe slow down the massive orc invasion... While a human paladin would do so at the drop of a hat (or helm =)