Why not just kill ALL the races then? It seems too many folks like them too much, so why not offend everyone equally and blow them all away?
Okay, bad joke, I know...
As for my race ideas...why not have the Torians and the Drengi wipe EACH OTHER out? They fight against these new beings, but tensions between them rise, their opponents realize that they can reduce the work on themselves by egging them on, arms are traded to both sides, the Torians and Drengin go to war on each other, get excessively powerful Dread Lord weapons, blow each other's major parts to smithereens, and the new races sweep in to clean up the debris.
A controversial idea, but in a way it makes sense...it always seem fitting that the two sides destroy each other. Or, alternatively, as has been suggested, the Drengin could re-enslave the Torians...
As for other races that could be axed...the Arceans as a race would probably get the axe because, let's face it, they have virtually NO story importance as far as I can tell. They seem strangely...generic. Apparently purely neutral civilizations don't really work in this game as well as they should...it seems the Arceans are not especially memorable, despite supposedly being a neutral warrior race. Where's their story?
The Drengin and Torians are probably too important story-wise, in their own way...that tension between masters and freed slaves is always a good vehicle for conflict. The Altarians and Terrans are also pretty important, since there's the "look-alike" storyline there...although it's possible the Altarians would be thrown out, and replaced by...the REAL Altarians. Not the Drath, mind you, but the true form of the "human" Altarians, if they aren't really human-like at all but, as has been speculated, masters of illusion who use the humanoid form to deceive.
The Yor and Iconians are also pretty important, with their tensions and animosities, with some interesting stories there. (Personally, I have the strangely satisfying notion that it was the Yor who somehow made the Dread Lords disappear or be destroyed...Yor become programmed by Dread Lords, Yor destroy Iconians, Yor spot Arnor and Dread Lords, classify them as organics to be destroyed, Yor destroy Dread Lords...silly idea, I know, but it has some potential...tho it'd be strange for the Yor to be more powerful than the Dread Lords, huh? XD)
That leaves the Korx, the Thalan, and the Drath...but each has their own merits for being kicked off. In the case of the Korx, they seem too large for just mercenaries (even following a vaguely Ferengi-like model); the Thalan are a little too odd for some folks, and their story isn't always adequately explained - what are they there for anyway? As for the Drath...well, some folks want to see them retake Altaria, yes? The Drath were there first after all...
In the end, it seems that ALL of the races have reasons for and against them...except possibly the Terrans, for the simple fact that we, being human, sympathize almost COMPLETELY with the Terrans - no one REALLY wants to see them die out in a campaign, yes? It'd sort of defeat the point in a way.