It's OK with the rarity of hybrids. After all, if they were common, we would actually have humans, mermen, gnomes, half-mermen, half-gnomes, sea gnomes, and triple breeds, and that's not what we want.

Main conflict is for the coastal zones, but also for high points if there are different human cultures warring among themselves, as those points are strategical and often natural borders. The sea race and air race seem to have a lot less friction, but we need to envision how (if somehow) they contact with each other.

I also think that the other two races also need subcultures, so instead of going the usual path of "gnomes, mermen, and fifty human races", I'd rather split them somehow with the races having a smaller number of cultures and fairly equivalent (emphasis on fairly, one race can have just two and another, say, five or six, but it's not time yet to be specific).