My current fantasy setting has a lot of different sentient species in it, most humanoid but some not, with a fair variety of physiology and psychology. I had come up with some ideas for unconventional races beyond the Tolkien Standard Set, and I shoved a lot of them into this one, the goal being that the world has enough different sentient species in varied niches that no one is truly the 'main' or 'dominant'. In particular, I created a world where humans (called the Disfavored in this setting) are not very numerous or powerful in the grand scheme of things.

I have two questions relating to this, one about realism, and the other about reader legibility.

The world does not have large nation-states, instead comprised mainly of autonomous city-states and small countries, with competing religious entities operating in parallel and without regard for geography. Smaller villages tend towards homogeneity over time, but most cities will have most races in varying proportions, usually with out one massively outnumbering the rest. You don't have 'elven kingdom over here, human kingdom over there'.

I wont list them all here, but there are a lot, and they have a fairly broad variety of body types, diets, preferred climates, psychologies, and cultures, almost like sci-fi alien species despite being from the same planet and in a fantasy scenario.

The question is, without resorting to outright handwaving, how feasible is this, and how many is too many? These species cannot crossbreed most of the time, so these are effectively parallel populations in the same location splitting food and space but sharing labor and other resources. Is this arangement- diversity with no clear dominant or majority population- even possible over time?

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My second question has to do with narrative. Most of these are not stock fantasy races. How many of these can actually feature in the plot without either cluttering the narrative itself or overwhelming the audience?