Dwarves have the best paladin starting stats, and half-elves will suffer a bit from the low wisdom/mana. If you want to min-max, play a dwarf, though I personally went human for my pally alt, because I like the human plate look and I wanted to worship Mith Marr. In the end, play what you want.
If you do go dwarf, make sure to put the 5 points into agility to bring it up to a 75 so you wont take the AC negative, the rest can go into stam.
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