Used to play this game all the time. So awesome.
Personally, it's hard to choose, and depends on what I'm doing. Overall I love the Dwarves, but I typically can't justify the extra picks needed to play them. I get cheery when I find them, once I finally get into Myrror, though, and if you decide to do something silly like a Myrran Alchemist Artificer, Dwarves got your back.
Generally, orcs rule.

I always have liked the Dark Elves. I love how much power they give you, though they grow very slowly.

Despite owning this game for over fifteen years, there are a lot of races I still haven't really tried, but I usually play the High Men. I have a soft spot for the humans in fantasy games in general, and in Master of Magic, I love the paladins. Once I get them, I build armies of them and send them everywhere. The AI usually isn't smart enough to figure out how to kill them. :p

I used to like playing Dark Elves for their Warlocks, though there's not much of a melee / missile units they have to offer, and it's not the best business for the unrest matter, using them to conquer other races.
Perhaps that's why I came to like Halflings so much - no Myrran picks, you can develop them quickly, they're a good base for food, their Slingers rule, and they cause the minimal unrest, when capturing other races.

I got about three races i like most... or four. Draconians (for what they are), Trolls (regeneration is way useful), Dark Elves (my favourite race) and Humans (because paladins rule).
In the end, my truly favourite race would be the dark elves with the paladins unit in them. Guess that's not gonna happen.

I need to check out the MOM fanpatch I found one time. It does a bunch of balance changes, in particular aiming to make Klackon actually playable.
I actually think my favorite setup I ever did was a Death Mage with Infernal Power. You need to play one of the races that get Cathedrals to pull it off, but it basically means you're getting 20-30 power per cathedral city, with Infernal Power and Dark Rituals in place.
That... is a lot of mana.
I don't particularly care for Halflings, though. I mean, they're really GOOD! Lucky beats the heck out of most other unit innates because of the way combat mechanics work; it SURE beats the High Elven +1 to hit bonus. I guess they're TOO good for me.
(Lucky; Boosts all the internal rolls by one. This basically equates to +1 resistance cross, +1 to hit, and... the equivalent of +1 to hit, except applied to defense. I think Lucky is the ONLY SOURCE IN THE GAME for that type of effect, too.)

I think Humans are the probably the best race for a number of reasons:
- Pikemen are the best early game unit you can build and are still useful in the end game with some nice enchantments.
- Paladins are also probably the best end game unit you can build, except maybe Hammerhands
- Humans don't cost anything to pick so you spend your points on other things like picking 11 life books and starting out with Incarnation ;)
I'm not sure if they're my favorite though...maybe dwarves...

After taking a tip from the MoM strategy guide... I love halflings....specifically halflings on the Myrran plane next to some Adamantine. Makes the slingers a truly terrifying unit. (My favoritest Sky Drake Murdering Unit).
Dwarves and Dark elves also lie close to my heart, however.

I usually go the SuperHero strategy, so I pick Dark Elves on Myrran or High Elves on the sunny side to provide me with mana and decent defense while I do all that enchanting.

I'm still getting used to Master of Magic, so I'm enjoying the Halflings. The extra food and Lucky mechanic makes things a little easier.

I like Nomad's but that's because I love Ranger's not just MoM Rangers either, my first MMO character was a Ranger, that's where they gained a special place in my heart.

I have been playing this game for 15 years and had the good fortune to talk to the intact Simtex team at E3 in 1998 just 2 weeks before they were all fired because Microprose was in the process of selling the company and anything not ready for Xmas release was killed. Talking to them they agreed that the "Halflings" are very hard to beat with their ability to ease dissent,utilise magic/mithril weapons(slingers) early,and better food balance. The complimentary magic to them is heavy Green with some Blue.

^ That's Stream of Life. And it is awesome. You can even start with it if you choose a 11 Life book wizard :)

I've mostly played High Men, because Paladins are so awesome, but for my sentimental favorite, can't say no to Barbarians.