Elf warrior at 20 is a victim, and is generally only fighting people higher ranked.
Since xp penalty only applies to race, saying you are equipped to fight people with 9 ranks on you is not true.
Mages can land every spell, and its harder to gear at lower levels.

I have no problem with penalties, but it is not because these races are always equipped to fight low xp races with 5-9 levels on them.
Its just one of the drawbacks of a race, and by 45 it levels off