-Won't that make players prefer to play a certain race just because it suits a certain class better?
Not necessarily, because this passive ability will only have its effect against one race, so for example if to many people create a human it will be better for the Domination to create Infernal Demons, and if there are to many Infernal Demons Sacred Order will have to create High Elfs. So the idea is to have more variety in the server when it comes to races and it will ad an strategic element when it comes to grouping for arenas.
-There may be a system where if the player pulls their character's affinity too much to one point, another affinity would be reduced.
I think that's common in all classic MMORPG, that if you increase damage of your build in exchange you will have to reduce survivability. But that's more common in Skill trees, talents trees or stats. I don't think that will be a good idea to adapt it for Racial Passive abilities, it will be too difficult to balance.
Let's say I'm a Demon and I'm in the arena with my party, will I be forced to attack only humans because of the meta?
Want to set up a squad with my friends to play, just with demons and let's say he's attacked by a group of elves?
The idea is good because it balances the server, but only if it is well implemented, care should be taken not to give one race too great an advantage over the other.