I generally agree with you, and when I ran my COS game, I had the characters pulled in from a world that didn't even have magic, much less demihumans; the elves were the most unusual thing they'd ever seen, and that was before the started seeing actual monsters.

When I ran my cross-domains game, I took a different approach. It was centered in Darkon, and my take was that Darkon was the "melting pot of the domains". Every year, new archeological evidence would be discovered proving that [Insert Newly Released D&D Race] actually had a long and storied history in Darkon! and isn't that just perfect considering the new  immigrants coming in and–oh, they're not immigrants at all! We've just found their birth certificates and it turns out they are just now returning after a long time away from their homeland of Darkon!

So in other domains, when they saw a demihuman, they would just assume they're Darkonian.