I had a similar problem with many systems before i began playing Hero. Why would people want to play a human in D&D when elves get so many better advantages (at least in 2nd Edition. never really looked at 3rd)? Assuming you want the three basic races; Elves, Dwarves, and Humans, i found that it wasnt that hard. With a little help from my friends the balancing came pretty simple. Altering their base stats, different everyman skills, plus a few racial disadvantages it wasnt that difficult. I give them all normal characteristic maxima, but alter the base and max characteristic. Small example of some of the things other races get.......
Elves:
higher base running
higher base Dex
higher base comliness
lower base STR
Dwarves:
lower base running
higher base STR
higher base CON
lower base DEX
Humans:
normal characteristic maxima
Also think of the utility other races have access to. Elves, typicly, being long lived, have worlds of knowedge at their disposal. Dwarves, typicly master craftsmen, have access to superior weapons and armor. Altering stats correctly might just be enough for some campaigns. Some GM's look at the society effects of having other races in the party. Elves being rarely seen in my capaign world could be advantagous. There are thousands of different uses to having other races in a campaign party aside from what their stats are. Ask friends, preferably ones that dont play your adventure, for what they think. Ultimately it boils down to you and what you think fits. I hope i have aided you in some small way.
Bryan