You'll have a lot more mana for healing up, maintaining supplications, etc., plus you've got good dex for evade. Not to mention that hydrophobia shit dwarves have is annoying as hell.

No to human or halfie. Runner up is definitely storm or dwarf. Storms get the bonus of resist physical and the ability to wield two-handed swords as a shield dedication. A dwarf gets really nice HP, some cool racial resistances, and the dwarf_only crusader mark which is pretty sexy.

I've never had a dwarf paladin (can't stand the RP), but I know someone who did a dwarf shield ded once and loved the shit out of it.

To power-game though, elf is probably the best, especially once you've stacked on edges, virtues, yadda, yadda..