Avatar or not, they're still not beyond specific versions of characters so much as somewhat based upon one version.
There's tons of Links, for instance. It's just a combination of the more adult-like ones in Smash, being most based upon OOT and TP's versions. Same with the other playable Zelda characters bar Young Link and Toon Link. Young Link isn't different from Link in 64 and Melee, both being combinations of various game designs, just using one specific model. Toon Link is based upon his portrayal in 3 games(Wind Waker, Phantom Hourglass, Spirit Tracks), who are not all the same person even.
This type of thing has been done before. It's hardly even relevant that it's 1st party. That's just looking for something that's not there. What's important is the character in particular, and yes, a race is a character too. That's how pretty much every Pokemon(Trainer aside) can work. They're based upon particular portrayals, sure, but the games still look at them like just any member of the species, even giving both Pikachu and Jigglypuff descriptions in Smash 64 as the Pokedex entries, like any other species. Pokemon Trainer is the same, just being a basic player trainer, using various quotes that every trainer has. And respectively uses the first known trainer design(the first avatar for Pokemon, based upon Red), and even being compared to a heavily more known trainer around the world, Ash/Satoshi.
I could easily see a Dragonborn in, if that's something they can find that could work into a great moveset. Other things actually holding it back realistically is things like balance, gimmicks, and how the companies feel about the character. Being slightly generic as a species doesn't mean much unless that generic species have very little moveset potential to the developers(like Toad has at this time. Probably is stating to change, but I can understand that view, especially since the character and species in general doesn't exactly have a major gimmick/thing to call their own).
