1. Be sure you're justified in having this conversation.
This is probably the most important step in even starting to counsel someone about poor character choices. Do you have the grounds, authority, or even high-ground to have this discussion? If you're just someone cruising into Goldshire to kill a little time before raiding Professor Putricide, and you happen to encounter a character concept you don't like . . . it's not your place to go "educating" them.
Don't get me wrong. I share a lot of the same social mores about roleplaying in WoW. I'm not big on vampires, (pre-Cataclysm) werewolves, sci-fi concepts, or anything that I perceive (personally) to be outside the game's genre. But it's not my job to enforce that view on others. It might be my job to have a little sit down with someone in my own guild, but outside of that? They pay their own money, and they have every right to play their character the way they wish.
If you don't have an existing relationship with the trouble player, then it's going to be tough to convince that person of anything. Make sure you're justified before you even attempt talking to the person. If you're about to tell someone their character falls outside the realm of allowable roleplay in your guild, then you should be very sure that your information is straight. Nothing could be worse than telling Bob that he can't play Edward Cullen when the guildleader soon logs in as Lestat.
2. Approach the issue with an open mind.
The challenge about coaching a fellow roleplayer away from inappropriate character concepts is that you're approaching the situation having already passed some level of judgement. You need to carefully refine that judgement away from vampires don't fit in World of Warcraft to vampires don't fit in the way this group plays WoW.
It's a fairly subtle point, of course, but it's important to allowing the troubled roleplayer to work with you to find a resolution. (There's a league of difference between talking with someone instead of talking to someone.)
3. Find alternatives.
This is probably the most important step of helping someone find a more appropriate character, and so I wanted to spend most of our time here. The reality is that our catalog of frustrating character concepts are usually really aimed at another goal with their roleplay. If you can help that person diagnose their true goal, then maybe you can help redirect them to a more WoW-based character.
Vampires - Vampires, for all that we're picking on them, are actually very traditional roleplay characters. There's a lot of concepts and genres that exist in a vampire character. For example, vampires are a good vehicle for the expression of lost humanity and the metamorphosis into a monster. That could be very easily portrayed by playing one of the Forsaken. Or, perhaps, the player wants to experiment with strange, dark powers. That could equally be mimicked by playing a death knight or a warlock.
Faeries - We've not talked about the faerie characters that inevitably pop-up around Azeroth. However, it's also a concept I know that a lot of roleplay guilds have had challenges with them before. Faeries, however, translate very well into other character concepts. If you're looking for a light, magical character, you have the obvious mage or priest option. If you want to indulge in luxurious, elegant characterization, then you don't really need to look much further than the Sindorei.
Demons - Demons are kind of a complicated subject, because that's a big, wide world. Most vampires and fae characters are generally pretty traditional. But demons can be a body hopping critter (maybe try a druid?), vicious and mean (perhaps a warrior?) or any number of fictional constructions. Perhaps you can try roleplaying a warlock. But instead of roleplaying the normal warlock, you roleplay the demon pet.
The point we're getting at here is that you should convince your fellow roleplayer to translate the attractive attributes of his inappropriate character into WoW terms.
Caveat: Provide an out
It's possible that the vampire player has worked just as hard on their own character concept as the rest of us do. Heck, I'd even go so far as to say that it's probable. And as anyone who's lost characters without total consent can easily tell you, it really kind of sucks to lose a character against your will.
If you do have a conversation with someone in your roleplay group, and they do decide to retire their character, you should let them have a graceful, in-character exit. After all, they're taking one for the team. You should respect that and the character the person created. (Reference the open mind above.) Who knows, they might make a good one-shot villain.
It can be tough to have a talk with someone whose character doesn't quite fit the World of Warcraft. It's a hard conversation about this kind of thing. You must be sure you should have that conversation in the first place. You should be sure to have the discussion with an open mind, so that you give the proper respect to a fellow player. And you should really try and help explore the character goals, so that you can help the player find another suitable concept.
Good luck out there, folks. Let your RP flag fly.