Very good topic, mate. This is a question which should have been asked years ago, but as far as I remember, it hasn’t.
In my opinion, the species names of races—like Mudokons, Glukkons, Wolvarks—should always be capitalized. These names refer as much to a race of people as a biological species, and are comparable to terms like Americans, Japanese, Phanariotes, or Norvicensians. This is especially important if the race’s name is the same as its position in society. It is important to distinguish between an outlaw and an Outlaw in case you come across one which isn’t necessarily the other. This would also apply to Interns and Chroniclers.
Names of wildlife species I always capitalize because it’s the Oddworld style of writing. I would feel as dirty doing otherwise as I would if I spelt Labor Eggs ‘Labour Eggs’. I find it perfectly acceptable for Oddworld to have its own literary customs. It helps to reflect both the culture of the universe, and the customs of its creators. This is why words like ‘ya’ and ‘klutz’ are more established on Oddworld than they are in formal English.
For Oddworld species that share their name with Earth species, things seem a bit more complicated. I’ve never seen ‘birds’ or ‘bats’ capitalized by OWI, whereas ‘Rats’ usually is—but not always.
A question related to this would be ‘Should we end plurals in “s” or “z”?’, to which my answer would be ‘with “s”, every time.’
