Okay so between Nelf and Human rogue my questions are this

Doesn't the weapon skill see a diminishing return?
Is the dps difference actually there?

Also shadowmeld vs perception: I don't understand why shadowmeld isn't considered to be the better choice?
Reasoning being that a nelf should get the jump on another rogue first regardless, because of the better stealth..that is a passive.

I understand that perception is active for 20 seconds but it has a cool down, and is also on the same faction?

I don't know what you are asking by weapon skill. But I am going to say the answer is no. +5 weapon skill at level 1 is just as beneficial as it is as level 30, 50, etc. If we can use level 60 as our example: every level you gain 5 max weapon skill, ending with 300 total by level 60. A human character who is level 60 has an extra 5 max skill points, so they cap out at 305. It's more complicated than this, but essentially their baseline melee accuracy is treated as if they are level 61, as they have the number of skill points that a hypothetical level 61 would have. It's far more complicated than this, but that's a good place to start.

So a level 5 human using a mace, for instance, would be treated in the melee miss calculation as a level 6, essentially. The reason the Edgemaster's Gauntlets are so powerful for DPS warriors is that it raises weapon skill by 7 points, which dramatically helps with dps in raids, especially on bosses that are level 63.

So I'd argue that it doesn't matter a huge amount if you go human or nelf on the basis of the weapon skills, a human might provide an extra 1-2% dps in a raid, maybe? But it also only matters if you're going swords. If you were going to go with daggers/backstab build on the rogue, then it doesn't matter.

Also shadowmeld doesn't work the same in vanilla as it does later. In retail at least since Cataclysm, it's pretty much an extra vanish. In vanilla, you can't use it in combat. 90% of its usage is for you to sit and safely eat/drink in STV on a PvP server. Or to hide from a higher level. It doesn't have much combat utility, especially for a rogue.

TL;DR - If you want to do a tiny bit more dps and you want to go with sword spec rogue, go human. If not, it doesn't matter and everything else is super marginal, pick for looks. People ask too much about optimal race, when race bonuses are really really small in the grand scheme of things.

The passive Shadowmeld bonus adds up to your stealth level pretty well, just check out the research done by Shadowpanther. Be your own judge on what is better on the Perception vs Shadowmeld debate, but I think Shadowmeld is much better.

With the focus on min/maxing and the echochambering of people on different fora on the topic of weapon skill many will go for a human with swords. Being a Night Elf gives you more opportunity to go daggers IMO; just talk to your raid about the benefits of humans and their weapon skill and leverage that into better daggers for yourself