Unless I'm mistaken, Hillsbrad and Southshore are supposed to have quite a large population of Lordaeron survivors, and some refugees did make it to Stormwind. Keep in mind that both Southshore and Stormwind are coastal towns with Harbors (granted, the in-game Harbor for Stormwind is more recent, though that doesn't stop ships from going there), so escapees from Lordaeron getting that far south is not entirely far fetched.

Granted, compared to the original population, it's not a large percentage, but there are living citizens of the kingdom remaining. Granted, the ones in Hillsbrad have been getting picked off by the Forsaken for a while now.

Also, that's a pretty broad brush to paint the whole of the Alliance in (though by your comments I assume you're referring to humans specifically). Sure, there are racist humans around (though most of the examples are actually in the Scarlet Crusade). Same as there are racist orcs, night elves, blood elves, or any other race. It irks me to no end, though, when people pin racism as a defining trait of humans in-game above all other races, since there's far more evidence of that not being as overwhelmingly true as people like to think. If it was, the Alliance would simply not be working as well as it is.

Look at places like Wintergarde Keep, where you see night elves, gnomes, dwarves, and humans fighting side by side as if those racial bounderies never existed. This wouldn't work if the mantra of humans was "all non-humans are monsters".

Keep in mind that the Forsaken are walking corpses, and that the only real experience or knowledge relating to things like them are the massive army of undead that was raised for no other reason than to destroy all living things on the planet. Can you really blame them for their initial reaction to be one of fear? And when these other undead proceed to, by all accounts, slaughter living residents of nearby towns with next to no provocation, is there really any reason for that perception to change for the better?

I'd argue that the first positive experience any playable humans have with the Forsaken would be within the Argent Dawn. And by that time, quite a bit has happened, and those opinions (reached by completely legitimate reasons), may be too deeply set.

In other words, no, there's not a lot of the Alliance that likes the Horde, and vice versa. To throw away all of the details and just cry racism is a fairly shallow reaction there, though, on either side.

tl,dr : Racism is present on both sides, but arguably there is no "racist" race above any of the others.