If your permanent race was something other than a normal player race, you wouldn't be able to use any gear, since it isn't made for other races. You force illusions on people if you wanted to simulate other races.
Live had the old project M for a really short time and I remember testing it out a bit. I think that is what you are speaking of. Both that and shrouding have already been discussed a few times on these forums here and there. Unfortunately nothing has really been put in place to get any of those possible features working yet.
For now, the short answer to your question is just "no".
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