What difference between a human paladin and a dwarf paladin? Well... your allies might have a harder time buffing you, but your enemies will struggle to click on you in PvP due to your shortness.
Really, right now only two races (Tauren and Undead) have actual gameplay-affecting racial abilities. And if you're on the PvP server, Paladin is a better choice than on PvE because Paladins have special abilities versus Undead. And guess what race is most popular in the Horde right now?
As to which class is more wanted in parties... well, every party wants ONE warrior. Warriors are the masters of tanking right now. Paladins don't seem to be able to manage aggro as well. The way some of their abilities work they can help someone else tank, but they just can't do it as well themselves. Druids in bear form can tank also, but people really REALLY prefer warriors (Druid-bears aren't as good at tanking as warriors either). All that said, parties very rarely turn down extra healers. Paladins are the best at wipe recovery-- they have Rez and healing spells, plus they wear plate and have abilities (with one still NYI) to help them get away when everyone else has crashed and burned. The upshot? No one is better at preventing a wipe than a Paladin. Your presence means security, and lots of parties want security.
There's a cost to all of that: many paladins complain that soloing with a paladin is boring. Against non-undead, they have a limited number of combat abilities, whereas a warrior has a plethora. Playing on the PvP server may mitigate this, but that much I'm not clear about.
That's all I have-- the rest is up to you.
P.S.: we're mostly friendly here, don't sweat it.
Edited, Wed Oct 13 23:03:44 2004 by ChahDresh