I would argue that for most purposes, svirf is better. Stone skin, detect invis, different mage bonuses and the gnome gets a whole wad of nothing on top of the larger xp penalty. For warriors it's not even close, for example, and I bet there aren't many worse options for ranger and thief. Realistically, only shapeshifters play them for hp and because they don't care about stats and vuln, which seems dull.

Santa Zulg's options:

1) Remove/reduce to 100 xp penalty
2) Give sexy inherent (comparable to stone skin)
3) Give sexy resist
4) Combination of the above, maybe getting rid of shapeshifter as an option. Side benefit: more variety to shapeshifters.
5) Do nothing and ignore
6) File for later

Personally, I feel you can achieve a lot pretty fast by going with 1, 2 and 3 - not much effort for much greater player options.