The impulse, in creating a setting for a home game, is to include every possible character option. You want your players to be able to do anything in the book: any race, class, background. And you want to leave it open for stuff from other books as well.
That’s perfectly fine. It’s also pretty generic. The setting where anything can happen is also the setting where nothing is supposed to happen. IE there is no underlying theme tying characters together. No inherent story engine.
I’ve realized recently that the setting I’m creating for my next campaign should have a built-in story engine. That means that the major conflict in the campaign is 100% tied to the setting, the characters, and the character options.
The more Standard Fantasy you apply to your setting, by making all races available, all classes available, all everything available, the more generic your setting becomes. Settings are differentiated by its core assumptions. Those all determine what kind of adventures are taking place.
So in restricting character options at the beginning, and by creating locations that have histories of specific conflicts, you’re making a more thematically cohesive campaign. The characters, the locations, the adventures all feed into each other.
That’s what I want.