"Officially", any artwork depicting the "Wise Men" is obsolete. Any artwork that depicts them as Hylian is also obsolete, since, since the release of ALttP, the "Hylian blood" has already been shown to have "thinned" long before ALttP ever takes place, in TWW, so those artworks do not match up with the most recent canon. At the time, it was believed that the Hylian people existed not long before ALttP took place, and that their dying out was a recent phenomenon, so the artwork would have reflected this. As much as I hate to say it (since I like the ALttP SNES art), the ALttP SNES official art is null and void.

Hylians can breed with Gerudo, as we see. Hylians can also breed with Sheikah, and probably Kokiri. Zora are humanoid fish--the way they birth their offspring is different (laying eggs vs. live birth), but the process by which their offspring are "made" is probably the same. The same goes for Gorons. That being said, since Greek mythology has humans breeding with bulls and swans, I don't see why this concept is so farfetched.

Rauru is "a Sage", not "the Sages." "The Sages", being Darunia, Saria, and Ruto (Zelda and Impa probably knew where Link was, as well), who all were looking for Link, and, indirectly, the Master Sword (the Hero of Time). Whether or not they knew who exactly they were looking for (the Hero of Time) is irrelevant. The person for whom they were waiting turned out to be the person they were said to have looked for in the legends, and so the legends match up. Zelda/Sheik and Impa were also looking/waiting for him as well--waiting for him to come back to Hyrule.

Also, the "bloodline" of Sages/Maidens/Wise Men/whatever that "guard Hyrule" lies within "humans" (or Hylians, if you want to maintain that point--even though there are no Hylians in the post-TMC era--which also means that there were no Hylian Wise Men) by FSA/ALttP. According to your timeline, we have Sages in OoT/TWW, then Maidens in FSA, then full-powered Sages AGAIN in pre-ALttP, and Maidens AGAIN in ALttP. Now that just seems silly. Where did the first set of Maidens come from? Out of thin air? And why did they go back to being Sages for, say, a generation, and then back to being Maidens again? It makes much more sense to say that the "Sages" in OoT progressed over the thousand-some-odd years between OoT and FSA into the "human" Maidens, and that the Maidens strived to "work together" against evil, as we see in ALttP.