Do Observant Muslims allow interracial marriage?

This depends on the person. But, Islamically speaking, interracial marriage is allowed, and racism is highly discouraged. When Muslims stand to pray to God, race is insignificant in his eyes, as what is important is the amount of faith one has.

God (Allah in Arabic) says in the Holy Qur'an 49:13: "O mankind, indeed We have created you from male and female and made you peoples and tribes that you may know one another."

This shows that God encourages us to mix races and not to view it as a boundary for segregation and enmity, but as something unique each person has.

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Additional point:

The above answer is absolutely correct. In addition to the above, the only condition; per Islam teachings; is that a Muslim man can marry only who is Muslim, Christian, or Jewish. A Muslim woman can marry only a Muslim man.