It's a bit on the extreme side (keep in mind this is from the AD&D 2E Era where Ravenloft was a tad more Weekend in Hell than it is in 3E). Here's what the Gazetteer has to say about Barovian reaction to elves/dwarves:
Dwarves are thought to dwell deep in the Balinoks, and wild elves purportedly stalk the Tepurich Forest. Rural Barovians who encounter such nonhumans are likely to consider them monstrous freaks or malicious fey.
It mentions rural Barovians since they may have less experience with foreigners and other races. That being said, it'd be impractical to be as harsh, but many shops and facilities aren't available to elves or dwarves unless they invest a lot of points into Influence.