I've played this with my group a few times and... the whole race\class thing is a nonstarter for us.
After the first two games we threw out the demihumans and just stuck with the "core four". As someone mentioned above, this fits classic sword & sorcery better (for us, at least).
This is a tricky one to be sure, a real love it or hate it. But recently and idea was floated my way that I thought I'd toss out here for general comment. Its more 1st Ed cloning that App N I feel but might have some milage in it...Half elf House-Rule
If you roll any "Elf" result on your 0 level background, but really do not want to play one as a class you may declare your character is actually a Half elf.
This means you can pick from the core four classes as can any human.
Additonally you may either pick ONE (and only one) Elf racial trait that your otherwise Human character has Or
The Gm can assign or dice for two or three elven racial traits to your character. In this latter case the Iron vulnerability should ALWAYS be one of them so you get too "good" traits plus one bad one...
Any comments on that good people? I personally like it and am House ruling it in til there is an "Official" rule on the subject at least. You get just a dash of elf but have the human flexibility. You CANNOT choose this option for a character normally its only available to those lucky enough to get some kind of elf result in the background table. Its simple and should at first glance at least keep Half elves from being the over powered disasters that 1st Ed AD&D had as well I think.
I'd love to see half-elves in DCC, i have to admit. But i wouldn't allow that to be a choice. Besides "there's no choice apart from alignment" in character creation; using the rule you suggested, you'd get very few pure elves, as only someone with good INT would be Elf: if a character gets just 8 INT and 16 STR, he's better off as a half elf warrior, or if 15 AGI he would go for half elf thief. The balance for the Elf racial class abilities and higher HD than the wiz is the fact that everything is random so you could become a partially efficient, low INT elf, while if you were human you could've chosen a class more suitable for your stats.
You should have anyone rolling an Elf Occupation to roll a d6 * : if you get 5 or 6 you character is a half elf instead. He gets to pick a class and has one of these racial abilities rolled randomly: Infravision, Immunity ( to magical sleep and paralysis), Heightened Senses.
*this can be any die, and any range, to suit your campaign: maybe in my world halfelves are so rare to be seen as a bad omen, therefore you roll a d20 and only on a 20 you get to be an halfelf. In yours maybe elves and humans live together, you roll a d6 and be an half elf with a 4,5 or 6.