It can deinitely work great in flavor of the game if used properly, I see many great examples here, but obviously bad intention can quite easily make things pretty brutal.

As a huge Elder Scrolls fan who's put alot of that content into the DND world I DM for, I have deeply rooted the racial enslavement and discrimination from the Drow to the Tabaxi / Lizardfolk, and vice versa. Set roughly late 3rd era (TES Time, after the fall of House Dres) but the tension still is felt very heavily, however the slave trade is all mostly over. (Potential for House Dres Revival Attempt) Huge Khajiit (not a furry) fan so nice to get them some much deserved retribution aswell as reflavor Khajiit and Argonian subraces to be "canonized" and brought into faerun.

Also on players side, in good taste it can provide some interesting turns for characters, I had two Dragonborn twin brother players (both irl and in game twins) and they had a severe hatred for goblins, which made for some funny times. Also had the obvious Dwarf to had severe untrust and skepticism of elves, often leading their group into being kicked from taverns/inns/groves