They dek know about it SYX can recruit them

The undead has terrible, nay, disastrous relationship with the other races because of their negative traits, their cultivation techniques, and how their constitution is the opposite of every race on the gods' side. But, it hasn't finalized yet that they'd be on the devils' side in the upcoming war. As far as I've seen (read about) them, they're not as terrible as the other races (and SYX) makes them to be. Except for the shameless and treacherous traits of the undead soldiers and Sal (although we can see that Sal is very loyal to his race and the Undead Lord), we can contributed the other atrocities they committed in Hidden Dragon Continent to their nature constitution, like how the demons was forced to eat human because they can't find dark element. If SYX can find a common ground with them, it seems the Undead Lord and Kher are smart and wise enough to join her camp.

As above and also bear in mind that most humans/other races don't have any recent experience with the undead so what they know is what they've been told from the past. Also with the segregation of the races how would they know what they are like day to day. It's kind of similar to how when Japan was in it's isolation period a very long time ago they knew of people of other races but parents would scare their kids with stories of the 'foreign devils' who smelled funny (because Europeans drank dairy products which was not common for them it gave us a different scent). So any child who came face to face with a European may well have been terrified and too scared to find out the similarities between the races. Just for reassurance I only use the Japanese example because I studied History and Culture of East Asia and it's the first to come to mind. I'm sure there are other cultures where similar tales of 'outsiders' being devils are/were common.