My guy Adam Koebel is a god of race, ethics, philosophy, stereotypes and allsuch things in a tabletop RPG environment. I think this episode has some of an answer to what you're looking at here.
https://www.youtube.com/watch?v=4CTAC6-8GdQ&list=PLAmPx8nWedFVGdrP2JmcYzdvZC8sWV5b4&index=40. If not tweet at him or something he answers a ton of questions.
The type of game you're describing is pretty old though I'd have to say; I think a lot of new games (D&D 5th included) are less encounter heavy and have more weight on RP'ing. In Forgotten Realms, the goblin race (as part of the goblinoid species) are given some standard traits (persuasive, deceitful), and share a common history of tribalism. However, it clearly says they have the capacity for intelligence and emotion and whatever else you can think of and some 'civilised, good' goblins are found in most 'commonly good inhabited' cities. Physicality (short, agile, small fangs, pointed ears) can't particularly be changed that much which is sort of what makes them goblins I guess.
Sticking all goblins in your world as previous edition goblins or lotr goblins is literally just convenience or bad DM'ing, depending. Or perhaps in your world, yes, all goblins are armadillos
In modern D&D and other TT games from recent years there has been a tendency for these books to say: just ignore the whole thing if you want and keep only the mechanics - you do you.
Also while yeah you can create an RPG with drunkard, fat elves. Lithe Dwarf supermodels, humans being the literal gods and Orcs being shy scholars as a generalism - does it really make it any better or worse than the current expectations of variations of kith? I'd be inclined to think no.