I don't believe the code functionality currently exists for automatic language skill-ups.
My plan is to implement some awesome quest-based language learning in my custom server.
First the player has to gain enough faction with the race through race-specific story-based questing that gets them familiar with the race's role in the world, then they can learn the language through race-specific questing that will help make the player more familiar with the history and motivations of the race.
That's my plan, anyway.
- Shendare