So I think I might have figured out how to cross-breed in the game when it comes to making your character. I found this out on accident, but it's worked twice now, so I think it's legit.
I found this out on accident when I made an Altmer character. I made the character completely, but shortly afterwards I decided I wanted to be an Imperial instead. I opened the console and used "player.setrace imperial" and when I took a look at my character, he was the most elf-like Imperial I had ever seen. The character could easily have been the love-child of an Altmer father and Imperial mother.
I then did this again with an Orc. I made an Orc, decided I wanted to be Redguard later on. I used "player.setrace redguard" and, like before, the result was a character that was almost half one race and half the other.
So. Anyone else discover this? Can anyone else confirm what I'm saying? Am I imagining things? Is this just s glitch in my game? Or was this perhaps left like this on purpose?