[I was going to begin a series about demigods, but after reading posts at Jeff's gameblog and Sword & Shield, I felt inspired to scrawl something about linguistics and role playing settings.]
I'm a professional translator, so I tend to spend a lot of time thinking about languages (obviously Japanese and English in the main, as they are the languages I work with, but I have a general interest in linguistics). One thing I've noticed is just how different languages can be, especially those from unrelated language families - and I don't mean different in the naive sense that English doesn't sound much like Chinese. What I'm talking about is how languages that have evolved in completely different cultural surroundings to each other have also evolved highly different modes of expression.
An example: Japanese, like most aspects of Japanese culture, is highly minimalist, especially in its most casual forms. Consider the English expression: "How have you been?". The equivalent Japanese expression is simply "Saikin do?", literally translated as "Lately how?". (Sometimes this is abbreviated to simply, "Do?", or "How?".) Similarly, when two Japanese friends meet, they'll typically ask each other, simply, "Genki?" ("Healthy?") rather than the comparatively flowery English "How are you?" (three words to accomplish what the Japanese manage with one).
Another example: one of the most common utterances in Japanese is the phrase yoroshiku onegaishimasu (or variations thereof). Non-Japanese speakers visiting the country come to recognise those words because you can hear them everywhere. It is often translated in phrasebooks and the like as "Nice to meet you" or "How do you do?", but in fact it means no such thing - literally translated it goes something like "Please behave well". It is rendered "Nice to meet you" in phrasebooks because it is often uttered when two people first meet, but it is also used in a whole variety of other situations - at the end of letters, when making a request, when complaining, when asking for something, when signing something, essentially whenever a polite turn of phrase is considered necessary. That English simply has no equivalent phrase hints at a huge cultural difference; English speakers presumably do not and never have felt it necessary to exhort each other to "Behave well", whereas for the Japanese it is so common that it has evolved to ubiquity. Why this should be is a question for the armchair anthropologist, and beyond my capability to answer, but that a big difference in our cultural foundations exists is indisputable.
Another example: Japanese colours are different to English ones; aoi, which describes the colour we know of as blue, is also used by the Japanese to refer to the colour of fresh grass, green apples, and the green on traffic lights. Do Japanese and English speakers see colours in different ways? Who can say?
All this is a roundabout way of saying, languages which have been separated by many thousands of years of evolution are not just different in terms of the way the words sound; they are also based around fundamentally different cultural interpretations of the world.
Now, take that thought, and try transferring it to two cultures that don't just belong to two very slightly different types of human being; try transferring it to two cultures that belong to different species. Imagine the difficulty in understanding a dwarven worldview for a human - the huge matrix of assumptions, expressions and ideas which just aren't shared. It's difficult enough for an English speaker to learn Japanese and vice versa; how much more amplified would that be for a human being trying to speak a language of dwarfs? (Let alone orcs, giants, dragons...) It would not involve merely learning a new grammar and vocabulary. It would also require huge mental effort to come to grips with such an exotic way of viewing the world. Wittgenstein famously remarked that if a lion could talk, we could not understand him - the same must surely also be true of a goblin, Klingon or troll.
Would it spoil players' fun to tell them that, no, they can't communicate with other races/species except perhaps through sign language and monosyllables? I'm not sure, but I'd like to try it.