It all started with a conversation about whether the orcs in Lord of the Rings are racist against black people. She said yes, I disagreed. They're Germans, obviously. And then I went on to explain that orcs have now become much less "mindless killing machines" in most fantasy games, but then I realized that they've turned into "noble savages" instead. That's still racist; it idealizes them as simple-minded purists who kill not because they're inherently bloodthirsty but because violence is some kind of pure act. Which is a theme that runs through a lot of fantasy - violence and barbarism is the noble primal state of man.
Whether motivated by noble missions or personal greed, fantasy gaming characters inevitably kill everything they come across that has treasure, isn't human enough to feel sympathy for, and is declared "evil and subhuman." Then they loot the bodies, go back to the human town (or elvish or dwarven, who are human enough to qualify as long as they don't worship the wrong gods), and they sell all the magic swords and precious gems they got off the singed and dismembered bodies of all the kobolds or goblins or lizardmen they slew. Then maybe the king gives them a reward if they killed enough non-humans.
So Dungeons and Dragons is inherently racist. Adventuring parties commit minor acts of genocide and then profit off them. There's an old parody RPG system from back in the '90s, Violence, which was basically a translation of D&D campaign styles into the modern world: the characters walk into somebody's home, kill everyone who lives there, and take their stuff. That doesn't take the scenario far enough, though. My thought was, what if the adventuring party were incredible racists who profited off slaughtering hundreds of "inferior and evil" races?
I summed the idea up in my head as "post-colonialist D&D." The setting is basically the colonization of America, except in a medieval fantasy setting. At some point all these humans came to the New World to establish their feudal kingdoms, but those pesky native orcs and hobgoblins and gnolls and everything got in the way, so they decided they were evil and sub-human, spread a bunch of propaganda about how they worship chaos gods and make human sacrifices, and then hired a bunch of mercenary adventurers to kill them all. And those guys are the player characters. Racism (against orcs, anyway) would be mandatory, in fact, you'd have to make Wisdom checks in order to think of the native races as anything other than monsters that need to be killed or driven off. Instead of superior technology being the driving force behind human/European dominance of the natives, it'd be superior magic.
Oh, and there was also some stuff about elves as the Roman Empire, drow as the Byzantines, dwarves as Islam, and Quaker hobbits, but that's kind of a whole other bit.