Dwarven or Elves. Fantasy setting brainstorming

The Dwarves and Elves have been at war for thousands of years, powerful magic against runes, magical nature against industry, stone against wood.

But both sides have begun to fade. Elves are turning into shades as time goes on, slowly passing from the world, while dwarves are slowly turning into stone, returning from the rock from which they came. With both sides fading, they resort to human mercenaries and allies.

Both kingdoms now sport massive human populations living under Elder Race rulers. The Dwarves give fine craftsmanship and technology to their subjects (while still keeping it under -their- control) in exchange for working the fields, performing manual labor, and beefing out the dwarven armies.

The Elven realm is near utopian realms of peace and plenty, with the human populations living in elven realms with magical fields that are easy to harvest, and never seem to lack for food. Gifted humans are taught magic and kept as acolytes by the elven archmages.(portable magical batteries elven mages can draw on). Humans in this realm work to maintain the fields and populate the cities that elves are no longer able to fill. They generally live in special outer districts and perform minor labor and service. In both sides they massively pad out the Elder Race armies for battles.

Where could you take this setting further?

Orcs appear, are better fighters, but worse workers meaning work ethics, discipline etc Humans and orcs fight between each other to be part of the Eldar races forces.

Maybe the orcs are the last subject race, but were abandoned when human migrants moved into the realms of the elder races and were turned into servants? They now blight the war-ravaged borderlands between the two empires.

Humans are the descendants of domesticated orcs that the elves/dwarves used as servents in the before times; perhaps their domestication was part of what sparked the war to begin with.

Modern orcs are more aware of this than humans and wish to destroy the elder races so that their ways will rule the world, using the things their human cousins have learned to reunite into an unstoppable magic slinging, tech building Omnihorde.

Would the setting work better if the humans are ruthlessly enslaved, or if they are more of a subject race/people?

Maybe slavery, but life is not that bad?

Pleasant slavery is not much different than being a subject

I mean, either it's African-American level chattle slavery on a Brazillian level, or apartheid.

The dwarves finally break through into the elvish forests and cities after developing an antimagic bomb to destroy and dispel most of their magical protection. The elvish archers are overrun by massive warbeasts clad in thick armor that their now-mundane arrows cannot penetrate. The dwarves flood into the elvish city, spears leading, slaughtering the innocent females, ripping the children from their arms and throwing them onto the ground, their spears diving into the soft, innocent belly-flesh of the elf women, mangling their intestines and ripping through their uteri, ruining the beautiful fertile organs of their bodies.The dwarven blades cleave through their soft thighs, ripping them apart, dropping them to the ground where they desperately try in vain to drag themselves away, but even the stubby-legged dwarves can easily chase them down, hacking into their shoulder blades with cleavers and daggers, taking care to avoid the vital organs, saving those for last. These elves have bred the soldiers that killed their countryfolk, and the dwarves will not be hasty in taking their vengeance. Using polearms they will slash the achilles tendons of the female elves that try to run, crippling them, or else slashing their calves and forcing them to hobble around pathetically. Morningstars and clubs are used to smash the arms and legs, leaving the elf women completely immobile and helpless. Then the real fun begins. Dwarvish riding boars, famished from weeks of neglect, are released from their cages. They smell blood, and meat, and are eager to pounce on their prey, crushing bone and tendon with their flat but sharp teeth, tugging away shreds of flesh as the elf women shriek in utter agony. The boar starts with the legs; it will take many minutes for the elf women to die.

Seek help

I don't think he will.