I think you're only supposed to enable a single playable (that is, fortress; multiples races can be enabled for adventure mode) race at a time. This may explain why you always start off as orcs.
That said, I cannot say with authority that this is causing the problems.
Untrue, I currently have every playable race enabled, with no problem.
One issue I keep getting, is that vers. 4h whenever I try to create a new world with the adv. world gen the game crashes. Also if I use the standard world gen and I get all the way to embarking it starts me off as Orcs no matter what embark package I choose, and it also does it if I choose to prepare carefully. I'm running windows 7, I was using Obsidian Soul tileset, I only had kobolds and orcs enabled as a player race.
Also simple gem shapes was not working for some odd reason, when I try to turn it on it says "Invalid/missingtokens: !NOGEMSHAPE!"
World gen crashes happen intermittently, you just have to try again. I can't remember what exactly they are, but I believe there are some important reasons why vanilla worldgen isn't "recommended" for Masterwork.
Embark profiles have nothing to do with your race, although I think things get messed up if you try to choose one that doesn't match. Actual race selection happens at the same time you choose your site, you can change your race by changing your civilization, and then checking to see who your allies/invaders will be. Note, of course, that frequently there will be more than one civilization for a race, or possibly races might be missing if they died out in the worldgen process.