I broadly agree with this, but I do want to note I think Rings of Power handled diversity poorly, like a lot of recent fantasy productions.
Like take the Harfoots as an example. They're an insular tribe of hobbits who live as hunter-gatherers (or close enough). They also have visibly black and white members of the tribe.
How does that work, exactly? They don't seem to have different racial identities or some sort of race-based caste system. So why didn't all the black hobbits and white hobbits intermarry generations ago, becoming an even brown? Do fantasy genetics work differently, somehow?
Alternatively, maybe this is just theatre-style casting, and the race of the actors is not meant to reflect on the race of the characters - which I think is a defensible choice. However, the story makes it clear that Nori's mother, Marigold (played by a native Australian actress) is her stepmother, which seems to have been a choice made because they didn't think the audience would swallow a lily-white Harfoot having a black mother. So this implies the color of the Harfoots is a real thing, that exists in universe.
IMHO, they should have just made all the Harfoots nonwhite, because this would solve the issue of indigenous people being pretty racially homogenous while still allowing for diverse casting. And IIRC, within canon it's noted the Harfoots are darker than the other hobbits anyway.
You can draw the same conclusion across the other races, as well. Like what if all the dwarves we saw in the series were black, but the elves were white? it would add a little additional subtext to the story that would be interesting.
IMHO, diversity within a setting in a fantasy story should be largely limited to big, cosmopolitan cities, and there should be at least a little bit of worldbuilding referencing it. I liked how Carnival Row handed it, for example. Human skin color wasn't a major issue compared to the Fae being the subaltern group, but they did reference black people having migrated into the city from the "Pharonic Coast" several generations past.
