IIRC, hybrids had a 40% exp penalty all by themselves. Didn't matter what race you were (trust me, don't get me started about hybrid penalties back then). Some races had an exp penalty, but they were relatively minor (like 5-15% I think?), and at least for that time period really were offset by the fact that those races got some advantages (innate skills, better vision, regen, innate AC). Of course, they also screwed up some things, or horribly misjudged the relative advantages of some things versus others, but that's a whole different story.
You are correct that the major reason people didn't play large races was because they were large races and got stuck sometimes (or were ugly, or both). That these races also tended to have the most racial abilities (and penalties) is an additional factor. I'm not sure how much of the decisions revolved around the racial abilities and penalties versus being large/ugly. And of course, we can't know how much of a factor was exactly what's been talked about here: you couldn't play certain classes as those races. Let's not forget that int casters were really popular back then (moreso than now IMO). Druids as well. I think a lot of people have forgotten how lopsided class selection was back then due to the need for some classes to be in a group to really accomplish anything. And those classes tended to be the same ones that those large/evil races were restricted to. Some exceptions of course, but I suspect that had a lot more to do with the rarity of those races than anything else.
In a game where half the characters running around at any given time are int casters or druids, it's going to tend to reduce the relative population of the races which can't be any of those classes. And in the group game, the only class in the "holy trinity" that could be an Ogre, Troll, or Iksar (or Barbarian if you want to lump them in) was warrior. So not a whole lot of love there either. We honestly can't know how different the race distribution back then would have been if there weren't class restrictions present. How that applies to today, I can't say.