I'll pass on the difficult question of whether shaving increases or decreases drag, and just make a comment about the idea of shaving specifically for a race: is it a good idea.
I heard commentry for wimbledom where a tennis player wasn't allowed (by his coach) to cut his fingernails during a tournament, for fear of upsetting his balance and judgement.
I knew a very keen swimmer once. He was simultaneously a member of several swimming clubs in different countries so that business travel would not interfere with his training. He would talk about a term used by competition swimmers: the feel of the water. The idea is that with sufficient training and practice, one gets a feel for exactly what the water is going to do. Anyone who has swum a lot can identify with feelings that some days the water is thick and slugish and other days it is smooth and flowing.
Swimming crawl, swimmers breath in with their mouths below the waterline because they take air from a dip in the bow wave made by their head cutting through the water. Sometimes, swimming faster can take less effort since less head rotation is required if a bigger bow wave is made from greater speed, or if the dip in the wave and breadthing hole are perfectly aligned.
Swimming breast stroke, beginners will expend lots of effort bobbing up and down to breath. Better swimmers will swim faster just by having a flatter body position in the water: the legs kick more horizontally. But the legs are kicking in the wake of where the body has just been. If the legs are too low, there is the bobbing inefficiency. If the legs are too high, (kick too flat in the wake,) and heels will come out of the water and that's inefficient too.
From the crawl breathing and breaststroke kick examples, you can see that this feel of the water is the key to swimming fast; being one with the water that surrounds you.
So I think shaving for a race is a bad idea.
Swimmers are not going their fastest when they race. When they practice they will warm up with small paddles on their hands and then use bigger paddles to develop muscles when training seriously. Swimming without the paddles is slower.
So I don't see much point to only shaving legs for races, unless the idea is to avoid looking like a transvestite.
A Swiss friend of mine was expecting his countryman to get an olympic gold medal once. The Swiss swimmer shaved his head bald for the olympics in an attempt to be more aquadynamic. I think he came third. That doesn't prove anything!
