It's possible to do more crossbreeds than most people think. Horses and zebra can cross-breed, for example.
Just look at dogs to see how much difference can occur in a single species - compare a chihuahua to a great dane or both those to a weiner dog or bloodhound.
But yes, magic is the only way to explain most of the serious threat creatures in this game, unless there's some scientific explanation for magma men I'm missing.
But I'm not really too terribly concerned with actual inter-species romance so much as having the ability for forts to function properly with members of different species. Right now, if an elf or tigerman becomes part of your fortress somehow, then there isn't very much you can do with them, as they won't show up in many of the menus, they won't talk with dwarves, and you can pretty much be stuck with them being just haulers at best, or even just operate with the same functionality as simply being a tame animal.
(And having interspecies romance that cannot produce viable offspring would be worth having, anyway. If a dwarf, say, fell in love with a mermaid for some reason other than her potential profit margin, but they could never reproduce, it might make for an unusual and interesting story. Romances that can never really work due to the differences of species are pretty much the whole reason why mermaids became common and popular mythological creatures.)