HALF ELVESA bit of a spoiler to some, but Yuan is actually a half-elf, not a human. So, because of this being his "race," Yuan goes through hardships throughout his life. (To find out more specifics about Yuan, read about them in other sections in the History part of the shrine.) Half-elves are often hated, oppressed, and abused through out the Tales of series. Half-elves are a product of an elf and a human mating together. They often appear to look human, but they still have the ability to use the elven arts of magic. Humans are jealous of the powers that half-elves behold, while still looking human. Elves often hate half-elves for having "tainted" human blood within them. Half elves are able to live up to 1,000 years old due to their mixed blood as well. We see this when Genis says that he is afraid of his future because Raine and him would live far longer than all of their friends.
I personally believe that a lot of the hate towards half-elves, at least from the elven perspective, comes from the fact that Elves are so isolated. The elves in the game live in the sky, all by themselves, and are only visited once in awhile by humans that the elders allow in. Because of this, that must mean that the elves who were impregnated by humans must have either left the village, or may have been raped by a human. I am not sure about that, but that's just the impression I have. Although half-elves live much longer than humans, they live much shorter lives than elves do. When the kid is half-elf, and thus too different from both sides to live with either, it causes tension. The race relations between humans and elves aren't elaborated on at any length, but judging by the way humans are treated in the elven village, elves are racist toward humans for sure, and it appears that racism is reciprocated by humans. It really does seem a bit strange that half-elves enjoy little popularity even among humans who don't mind elves and elves who don't mind humans. But it's not as though racism is logical in any case, so racism still happens in this world.
Also, we should point out that the declining world, and maybe even the flourishing one, knows that the Desians are half-elves, and they are seen as evil beings. This is pointed out during a skit when Lloyd exclaims, "Damn half-elves, why do you do such things?" Even if there was a hope that half-elves could live amongst everyone again, the Desians give a bad name for them. But, we can also question, did this group become all half-elves because they had no place else to go? I think so. They were manipulated by Mithos into thinking they finally could have a world where they belonged.
The incompatibilities between the races are meant to seem ridiculous in order to make us consider how racism would appear to an outsider of our society. Compare the treatment of half-elves to the treatment of mixed-race children in books such as To Kill A Mocking Bird, and things that some of us may see or be aware of in our every day lives.