12 seems quite old for biting, which is how old Rugal was at the time. A more "normal" reaction, though not a socially appropriate one, would've been to cuss Garak out. Obviously there's a reason we couldn't have that on TV (ironic considering that biting was a more serious matter than some swear words), but that's why I think there's evidence of serious psychological problems. And your point about Bajor is why I would've suggested DS9 as an alternate location where they could live. It would still be Bajoran enough that Rugal would find some familiarity in it, but Federation enough that diversity is a value. For all of Keiko's flaws, I know she would not tolerate racist bullying in the classroom, and I think that Starfleet officers would not stand by if an incident occurred in the public areas of the station.