We use neanderthals (Frostburn writeup), but have pretty much relegated non-human's to monster status.
I have no problem having mythological creatures as legends in the game, but they certainly won't be around in my games like the standard cosmopolitan D&D game.
As for monsters, I've let my players know that they just won't see most standard D&D monsters (orcs, hobgoblins) at least in their current form. I may use the statistics and change the appearance to suit the campaign (actually I do this quite often on the fly..I'll pull out an ogre or something for a beastie).
jh