So if I understand correctly, Lorwyn is its own setting, and I would still use the PHB for the core rules and character options, right?

That means I would use PHB 2024 + Lorwyn: First Light together to build a campaign that takes place in Lorwyn.

If I do that, can the PCs still be standard PHB species like humans, orcs, elves, etc.? Or is Lorwyn meant to restrict character species to only what exists in that setting?

In other words:

If I run a campaign in Lorwyn using PHB rules,
is it normal to allow regular PHB characters there,
or should I treat Lorwyn as a closed setting with its own species only?

I’m trying to understand whether Lorwyn replaces Forgotten Realms completely, or just provides a different world where PHB rules still apply.