I'm designing a game called Dwarf: The Old World of Dwarfiness. It's what it says on the tin; it's a game about the lives and the adventures of fantasy dwarfs.
I'm considering the possibility of allowing humans as optional player characters.
Humans in Dwarf would be a 'racial class'. Humans do not get the option of becoming Goblin-Stompers or Rune-Casters as dwarfs do; humans are just humans. Humans would also get penalties to their beard, gut, and nose ability scores.
Humans are much bigger than dwarfs however, thus allowing them to cover more area in the game's grid-based combat system.

A couple of questions:
Does the inclusion of humans as PC's in a game about dwarfs muddy the waters?
Are large sized characters ever balanced as PC's in games with grid-based combat? (See D&D 3.X through D&D 4E for examples of how large PC's are simply too powerful.)