This is another Timothy Zahn angled peeve, though honestly he isn't the only one who's done it before. What I mean by 'mega-race' is a species that is presented as so bad-ass that 1) They're almost unbelievable and 2) Everyone wants to play one as their character type. The prime example of this is the Noghri, introduced in the Heir to the Empire trilogy. Here we have an entire race of guys that are consummate assassins and warriors, even able to take out an enraged wookiee in hand to hand combat. Other examples would be the Barabel (a giant lizard-like humanoid species with natural armor and claws and teeth, etc.) and the Defel (a stocky, beast-like humanoid with fur that absorbs light, making them essentially walking shadows). Both of these were introduced in the RPG, but later expounded upon in novels (in the Zahn novels, for instance).
In all of the above cases, I don't have any problem with the concept of the races, per se. In fact, they're rather interesting. But when given game stats, each of the above were given a hell of a lot of special abilities, and without any really commensurate drawbacks. From a game balance perspective, this made them a headache for players who wanted to use them (and considering all the perks, who wouldn't?). All of this really hit just as I began my online MUSHing career (multi-user, text-based roleplaying). These races quickly just became banned from play because all the 'twink' characters wanted to play one. To my gaming group, this kind of playing quickly became something of an in-joke. In fact, there was one 'Poster-Species' for this kind of playing. It was (I think) a creation of the Admin of the first Star Wars MUSH. These were the Darians. They were a race of heroically proportioned (most were around 8-9 foot tall) humans who could shapeshift into giant panther humanoids. Most of the main people running the Empire (supposedly a xenophobic, human-centered empire) were Darians. And strangely enough, every week they seemed to develop some new racial power. Lowlight vision, enhanced senses, leaping ability, the ability to partially transform only parts of their bodies (grow cat claws while remaining human, for instance), the ability to shoot fire out of their mouths and piss acid... Okay, so I made up the last two, but I think you get my point. They became a joke.
And what REALLY peeves me about mega-races in general is the war of escalation that seems to go on with each successive one introduced (the Yhuzon Vong are a good example of this). Each has to be bigger and badder than the one before. It is ultimately self defeating. But alas, even I am a bit guilty of this in my own campaign. The Nagai are about the most 'mega' species I've ever conceived of. But there is no way in hell I'd ever allow one (at least a full-blood) to be a PC, and I'd like to think I've given them at least something of a game balance in their lack of practical and tactical sense (they're essentially spoiled children). But anyway, I'm cutting myself some slack since it's my blog.