I chose neither. Well, I prefer Stormcloaks but don't side by then since I like the Jarl of Whiterun.
The thing is, by choosing Legion, I also choose Thalmor. We may discuss what the Empire will do to clear them out and how they'll do it but nothing happens in game and it all depends on Bethesda. If you pick Legion you may as well find out, in the next game, that Skyrim is still free because an upstart of a youth took it back and fought off the armies. The Ulfric I saw in game was cunning so he'd secure his position by making alliances but Skyrim is defensible and deadly enough to throw back attackers. Imagine a Thalmor party encountering a giant. So it's all speculation that could go either way.
As for the racism, I played as an Altmer in the former playthrough and he never said a thing to me. He made me Thane. We never see him as a racist, just a man preoccupied with a war. You see him discuss the issue with someone about the dunmer and he basically replied "well, tell the grey elves that I'm preoccupied now with the whole of Skyrim". He may actually be a racist or not but we only saw him during the war so we can't judge things appropriately and whatever others say about it is subjective. And racism isn't as bad as having the answer for everything being "death". As soon as you enter Solitude you witness an execution not to mention your own. And Elisif would be a pretty bad queen, admittedly. (Just witness her court)
Also, remember that other races other than Nords are very rare in Skyrim so I see mistrust as natural. You can see examples of Dunmer and Argonians that struggle and then chat with the Altmer(I think) merchant that states she made friends and has a successful business because she took her time and proved herself reliable.