Some could be worked through, others would not. It depends on the flaw, and on the situation....
In my campaign there is a grey elf with the flaw intolerance against the durinic dwarves. But one time it came that his life was saved by a dwarf of this clan and now this dwarf has become a member of the party. Now the personality of this elf is described as quiet, helpfull, thoughtfull etc. What is the result of all these?
My, oh my but isn't that a juicy one?
As a GM, my impulse would be to forego part or all of the xp cost to rid oneself of the flaw if the elf would agree to do something important for some Longbeards. During this interesting side-adventure, the elf would get to experience the same kind of race prejudice he had had against the Dwarves, only in spades.
I'd work it in subtly and crescendo it until it was really, really oppressive. If the elf could make it through all of this without any killing, and was able to complete the "sub-quest", I'd let him buy that penalty off cheap.
As an advantage to offset the inevitable "But of course my character would shoot him, because he hates Longbeards!", I might throw something in there at the start where the dwarf character on staff could something big for the elf -- like sticking his beck (beard?) out to defuse an ugly situation, or take some punishment on himself to save the elf the indignity... it would be the dwarf's choice, of course, and an interesting one at that!
Of course, it COULD go the other way, with the elf completely submitting to racial hatred and mucking things up BADLY. If he survived, you could INCREASE the ep required to lose the flaw.
I feel that this is the stuff that game-reminiscences are made of. Call me crazy.
Drama, baby, drama!