Solving the "elf superiority problem"

[Morphic tide]

The situation presented in the OP is really, really janky, in that while it does give an explanation for the long-lived races not dominating everything, it doesn't give a realistic outcome for how its proposed process would play out. Generalized plateaus work just as well with the underlying "normalized soul" explanation, but this then faces serious issues with the spectacular divergence that is the truly monstrous races like Dragons, given they are reliant on being well above average in most respects as a quite defining feature.

This can be worldbuilt around pretty easily by having the various scales within varieties form different distributions and play around with averages to fill in a lot of the flavor, such that every species has negligible differences in the theoretical average member, but the concentrations and emergent properties form all manner of stereotypes by the usual generalization of impressions method. For example, Elven longevity may give the appearance of on-average superiority, because their rolling totals get to be skewed to the ends of careers so much more heavily. You don't see the apprentices, because they're a smaller proportion of any given field.

And Dragons may specifically be the outcome of the upper end of a bi- or tri-modal distribution, such that being a Dragon is just the same as the various archmages, but that particular species almost always expresses this potential anatomically instead of professionally, such that you get ridiculously huge Great Wyrms instead of Dragon Archmages because all the supernatural capacity is taken up by their body.

There's also just not having science. Long-life superiority doesn't mean much of anything when your advancement is based on flat-out guesses, however educated they may be. Empiricism is a big thing for societies, and without it you don't exactly get very much advancement, because so many things are coming down to guesswork. The image of the experimenting Wizard is nothing like the image of the experimenting Scientist, and leaning on this with judicious application of Divination can keep the roots of the society firmly black-boxed and utterly immune to the exponential shenanigans that make spectacular longevity actually an advantage.

This then allows for Liches to progress with time, so there's a reason that people do it, and things being largely a black box with all sorts of obvious differences in the "usual" nature of the various races hides the fact you're not actually going to be any better than a fully trained mortal, you just have the time to be sure you reach that point, so while most Liches are Archmages, they're not any better than a mortal Archmage, and this is in no small part because the lower-quality Liches don't last very long. In choosing Undeath, they near enough guarantee survival to see their limits.