What if quarter-breeds simply used the stats for the 3/4ths race? At that point there could be a token added to them that says they have elven blood/heritage (or whatever) but it wouldn't actually have a mechanical effect.
But it gets thorny if someone were 1/4 elf, 1/4 human, and 1/2 dwarf. One way of handling that is saying those crossbreeds simply don't happen, as a dwarf likely wouldn't be attracted to someone who epitomizes both humans and elves. Alternatively, make it functionally a regular dwarf, but include heritage tokens for both human and elf. It wouldn't be the most elegant solution, but nor would it be needlessly complicated.
-''You are really beatiful Amede, but I've always wamted to ask, how come you've got those small ears, and you sometimes start throwing tantrums for no reason?''
-''Oh my dear Ekel, that's easy to explain. You see, My mother's mother was a Dwarf, so that's why I have small ears. The tantrum part is because Im not dwarf enough to enter martial trances as they do, so I sometimes become really battly, with the most innofensive things''
I really love that, even if a parentage of a different race gets abstracted enough for the creature to be considered of pure breed, you can still have long-lasting traits from another races.
In the context of stories, genetical laws of dominating genes are substitued by ''the strenght of the blood'' meaning that mundane races' traits get transmited normally, and if they interbreed, those traits are expressed as usual, but if faced to breed more again with a certain race for generations, those phenotypes are expressed as lessed and diminished, as in my example. And eventually dissapear
But divine races that mix themselves with humans, in stories, tend to give them powerful and really over the top abilities, that no matter how much you breed them again with their own kind, never fully dissapear
Think Of a certain clan of humans whose great great great great grandfather laid with the godess of fertility and wisdom. After that, the semi-god that came from that relation had a strong inclination to obtain wisdom (certain boosts to atributes, values, and etc., from birth) and she would remain fertil for all of her life. This semi-god, who represents a new race that could keep on if said goddes had another affair with a mortal and they met, Eventually marries a human and has babies. All of those babies have less from-birth inclination to love and studying than her mother, but as the godess represents a so strong force, her seed will always represent the same things she represents
This means that, no matter how many generation pass, the descendants from that union would always have a fixed inclination to those spheres.
This is amazing because it creates at the same time various tropes, and from a realistic and clean way
1-semi-gods from birth
2-clans/chosen people (they might use this as a reason to make wars and stuff), of certain nature(living in nature, although they are humans, for example)
3-A way were gods can directly affect the transcurse of history, and the unique mechanics and costumes of the game's races, something we actually lack (Its amusing to think of gods having ''moods'' and going to eart to breed)
4-Racemixing with good and bad things, yay