When your active race has no tokens on the board, do they still have to go into decline before you choose a new race?
You still have to go into decline. This is clarified in the FAQ, where every answer has been made by a Days of Wonder spokesperson:


  All active units destroyed
  
  If all your active units are destroyed in
  one turn you may:
  
  1) Score points only with the in-decline race. or
  
  2)
  Go into decline and score 0 for that turn. You may not take a new
  combo this turn


This makes sense to me. If it were otherwise, you would be effectively penalised if you had just one unit left in play. Although having no units is unfortunate, it shouldn't be a strategy to prefer being wiped out in order to skip a decline.

With regard to the "fairness" objection, if you've waited until such a late moment that you could be wiped out, then you've already accrued the benefit of keeping the race active up to now, and this is the price. Small World is all about the trade-off in choosing when to decline. In this situation you've got what was coming to you!