Because you can't directly choose the race of your Sov, it bugs out a bit.  Normally, when you are creating a Sov, there is a nation tab connected to it.  So if I am making custom Sov "Lord Xia" to rule over Resolyn, he will be a wraith, no problem.  BUT, if I want to make a custom faction it fucks up.  If you are scrolling and leave it on Yithril then select make a new faction, and create an Altarian kingdom faction, your Sov will look like an Altarian, but have the base stats of a Trog and will be listed as a trog when you bring up his info page in game.  Eventually, I notice that after awhile, it will change to just saying "human".