Well I'm afraid I've been out quenching my thirst again, so I'm a little delayed in responding - however it seems to have been summed up pretty well already, so I won't go into great detail. Suffice to say that there are many variations on character recognition, and it is indeed feasable to implement it in a game of the size you specified.
However your problem seems to be more of a "race recognition" than an individual "character recognition". It would be extremely simple (and use hardly any memory) to store which races each character is familiar with.
As Robbert pointed out, most of my discussions and debates have concerned dynamic descriptions rather than character recognition - however I have implemented character recognition in the past, and have also written an article about such a systems (complete with a codebase-independant snippet which provides the basic framework) in issue 3 of the . So I do have some familiarity with the subject at hand.
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