Now this is a really interesting in universe question! Someone summon Bryke!
It really goes back to how “race” in the Avatar world is socially constructed. Is it based on the element you (or your relatives) can bend? The color of your eyes or skin? Or the country you live in?
We know that in the original series, Katara, Toph, Sokka, and Aang pretend to be “Fire Nation” and successfully pass by explaining that they are “from the colonies.” Because of the culture’s policy of imperialism and assimilation of conquered peoples, these characters were able to (pretend to) identify as Fire Nation relatively smoothly.
Another example might be the character of Ty Lee. In the series, she identifies as Fire Nation; it’s the nation she grew up in. But—look closely —her physical appearance (hair and eye color), personality, and “bending” skill set would imply that she is actually descended from Air Nomads. And, at the end of the series, Ty Lee joins the Kyoshi Warriors, so will Ty Lee come to identify as Earth Kingdom instead? Or is she always going to be Fire Nation by birth? Is she actually Air Nomad all along unbeknownst to her? Is she “racebending”? Or are the lines (social constructs) defining the Four Nations “bending” now that national integrity is no longer under threat from Fire Nation imperialism?
Is there a history, for example, of Fire Nation actors portraying characters from other nations in an oppressive manner? Are people from Earth or Water tribes forced to change their physical appearance to fit in? Is there colorism? I think that within the context of the Avatar world, bending Korra to be “Fire Nation” is different from bending Korra to look more (real world) white. Unless, of course…those motivations are intersecting…