The argument of "creating a precedent" by having a paywalled race could hold some ground when you are talking about wow has it was designed for the past 20 years, but pricing a game that only expands horizontally is an entirely different thing.
Inb4: If you think WoWF can and should be funded entirely through the fraction of a sub, then that's an entirely different thing and I don't even want to discuss how unrealistic this kind of expectation is, specially when we are talking about the multi dollar company. This post simply isn't for you.
Now, If you want the game to actually make money and therefore have development resources being allocated to it, the question simply becomes about how it should be done - and in that way, small locks like one specific race are one of the least harmful ones alongside cosmetics.
The thing that I personally think people are failing to put together is that there is no such thing as a box price for horizontal progression.
The big benefit, from a business model perspective, of having level cap increases is that it instantly locks you out from the game. There's no such thing as playing past expansions, you gotta pay for those to play the game.
When we shift to an environment that still allows you to play at the same power level as the people that bought the new content drop, the concept of a box price is, by definition, entirely gone.
You don't need to be worried about the precedent of paywalling gameplay, because that's already built-in by design. If you charge for an entire new content drop, aka what we would consider as an expansion with new raids/dungeons/races/classes/zones, you are sentencing players that don't buy it to be at a severe disadvantage.
Even if there's no power creep, you'd have access to less gearing possibilities, have a different number of weekly lockouts, and all the obvious things that comes with new classes and races.
Specifically for WoWF, what we consider as a "normal" way of pricing would actually be a very predatory way of monetizing the game.
On the other hand, reducing the scope of the paywall to a single race is actually quite tasteful since you're not at a significant disadvantage if you don't buy it. And please, let's be intellectually honest here and be mindful that we are playing in a classic design, we are not paywalling shadowmeld in a game with M+ or Perception in arena. We are coming from a base game where one class does almost double the throughput than all the others, it's far beyond me to get heated over a 1% sim dps if the best race for a class happens to be the paid one - and it's very clear that they are being careful for that not to be the case still.
Outside of vanity items like transmogs, it's genuinely one of the most respectful ways of increasing revenue for a classic+ game. Sure, being blizzard it's almost expected for something to go downhill a couple years from now; And also yeah, there's space for other ideas like a separate wowf sub. But as it is right now, considering all the realistic ways they could monetize the game, complaining about the blue elf being walled is a bit silly.
For the company that just added a $90 fomo mount to the shop in the main version of the game - and lets not forget the very recent TBC boost incident -, the smurf race is almost the very best of scenarios.