Which race makes the best paladins?

Answer 1

The race you elect to make your Paladin is - despite personal preference - also dependent on what role you want to play.

PvE - Damage

The Human bonus to Expertise when using Swords and Maces makes it easier to hit the Expertise cap, and they can get our of movement-restricting abilities using Every Man for Himself.

Tauren are stronger than average, which gives a tiny bonus to damage.

PvE - Tanking

When tanking, the Dwarven Stoneform (10% damage reduction) will come in handy, as well as having the Draenei self-heal Gift of the Naaru (20% of total health over a few seconds).

Tauren can use Warstomp to control lesser enemies, which can be a slight benefit while tanking. Blood Elf Paladins can use their Silence/Interrupt to control casters - however, with both Avenger's Shield and Rebuke, any Paladin would have enough tools to deal with those.

PvE - Healing

The Human bonus to Spirit increases your Mana regeneration, which gives you a little bit more breathing room in terms of mana.

PvP - General

Where the Alliance seems to have the most beneficial PvE racials, the Horde wins in the PvP department. The Blood Elf's Silence and the Tauren Warstomp are both excellent tools to control an enemy team, with only the Dwarven Stoneform ability providing PvP utility by increasing survivability, as does the Gift of the Naaru from the Draenei.

Conclusion

For PvE, the Draenei provides a substantial benefit, as does the Dwarf, on Alliance side. At the Horde side the Tauren seems the most likely candidate.

For PvP, Dwarf has the greatest benefit on Alliance side, with either Tauren or Blood Elf on the Horde side.

Outside of this, it's pure personal preference.