I had a very similar argument with a hardcore night elf RP a while ago on this very subject. A few things to point out:



1) As you said, player DKs are heroes of their races. More importantly, however, is that most of them (certainly if you follow the storyline laid out for your character by the start zone) were raised against their will. They can't help being undead.
2) In addition to the wisp thing (which a lot of players, for whatever reason, refuse to categorize as "undead", though their status is a bit iffy), wardens pretty clearly practice necromancy in making their Spirits of Vengeance from the souls of their enemies. Now granted, Wardens are supposed to be pretty morally gray, but some degree of necromancy is sanctioned by the state, and because the night elves are a theocracy if the state sanctions it so must the Temple of Elune, and, therefore, Elune herself. If Elune is okay with Wardens using necromancy, then so must the public be.




That said, the fact is the night elves have undergone significant cultural change since WCIII. There aren't many similarities to how they were presented at the time, but a lot of RPers refuse to acknowledge that. A lot of Night Elf RPers love to live in a bubble and you're just gonna have to deal with them.

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