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Having arrived at Sentinel, I'm a bit surprised that the common folks in the streets all use the same sprites as Bretons in Daggerfall, even though they have Redguard names. Shouldn't the citizens have Redguard appearances, like the people of Alik'r?

I think there were mods for that, just like the ones that 'fix' sprites for certain Dunmer noblepersons.

I also noticed that the people do not have the same appearances throughout the Sentinel region. In the southern areas they indeed do look like Alik'r citizens. Perhaps this was intended to have "paler" Redguards living more to the north?

Maybe the different appearance has something to do with the climate map (shown , just scroll down that post a bit)?

Yes, the NPC sprites in town are chosen based on terrain texture sets, which are based on climate map, as far as I can remember.