The idea is that this picture, from Mentzer Basic, is still a valid representation of demi-humans in Hammerstein! or My-stara. What we understand is going on in all those pointy-eared heads however, is quite different.
DWARFS: Obsessive compulsive trainspotters with a fascist tendency
Dwarfs were created after the first Empire of Humanity challenged the Gods. Demi-humans, they embody the concept of LAW, and are a conservative force. They have a love of order for its own sake, of maps, records, archives, and collections. It is their intent to track and record all the moving parts of history, and, for the sake of their sanity, arrest, or at least slow, the movement of these parts. They are great scholars and master bureaucrats, but are agents of reaction.
Dwarfs have a reputation as having a lust for gold and other precious things, but this is a misconception. That it is such a common view is the result of two things. First, all Dwarfs are natural collectors, using their obsessions to order the world. Not all Dwarves collect gold coins, or jewellery of the First Empire, or other treasures, but enough adventuring Dwarves do. That is why they are adventuring Dwarves. Other Dwarves collect butterflies, leaves, or perfumes, but these tend not to develop the ‘rock star’ reputation that comes with being a dungeon delving adventurer. Second, the Hard Core Dwarfs and the Royal Casts (yes, Casts, not Castes) of Iron Mountain and other Vaults, have an interest in accumulating gold and gems (and whatever else Humans might use as currency). By controlling the money supply, the Dwarfs believe that they can control, or at least restrain, the change and progress driven by rapid movements of money. A Dwarf King will go to war for gold, as will a Human King, but their motivations are vastly different.
Hard Core Dwarfs are the Dwarfs who rarely, if ever, leave the Vaults. Hard Core Dwarfs live entirely ritualised lives, ordering their time and their space according to their interpretations of the Plan. Of course, such an obsession with order means that Dwarven history has included more than one schism. The causes of these schisms appear utterly inconsequential to anyone who is not a Dwarf.
Dwarfs do reproduce biologically, whatever the jokes might say. However, the Dwarven saying ‘True Dwarfs are made, not born’, can be interpreted literally as well as metaphorically. It is not for nothing that the Royal class of Dwarfs are called The Cast.
GNOMES: Amoral, eccentric inventors with little ability to see the big picture.
Gnomes, on the other hand, are degenerate Dwarfs, or so the legends go. Emerging (or created?) at some time during or shortly after the Second Empire of Humanity, these were Dwarfs who rejected the tyranny of Law. Taking their lead from Humanity – some even taking to the worship of the trickster God Humaman – the Gnomes applied the Dwarven interest in understanding the moving parts of a system to make NEW things. Master inventors, their skill is not in constructing the plausible but the implausible – fantasy inventions. For instance, where Humans might devise a new system of rigging, Gnomes build submarines. For this I’ll be taking a lead from PC2 Top Ballista!, using it to make a Gnome class for my LotFP/Lab Lord hybrid. The Dwarfs are probably not wrong in seeing the Gnomes as tainted by Chaos; Gnomish inventions have a tendency to both cause disorder and become disordered. Most Gnome heroes die not only with their boots on, but their goggles and apron and work gloves too. Thank the Saints that Gnomes are a rare race.
With a Third Empire of Humanity just a twinkle in the eye of any number of would be Tyrants – though Byzantia formally, but impotently, claims to be the seat of the Third Empire – there has been some reconciliation between some of the more adventurous Dwarfs and the Gnomes. Who knows how an automatic counting machine might aid Dwarven record keeping? These adventurous, less rigidly-minded Dwarfs view Gnomes are childish deviants. Hard Core Dwarfs, however, would happily eliminate the whole Gnome race.
Having the ‘demi-humans’ of Hammerstein! (and My-stara) as derivations from and exaggerations of the elder race – Humanity, grants a licence to make them one-dimensional. This is a good thing. It prevents demi-humans just being short or pointy eared Humans. There is an in-game reason by Humans are a race of great variety, while demi-human personalities have a much more restricted palette. One-dimensional demi-humans also justify race-as-class, incidentally.
Obviously, these Dwarfs are at least a little inspired by Glorantha’s Mostali, with their descent from the original moulds and their concern with the working of the World Machine. There’s also a little of James M’s Dwarfs in there too – if I remember right, Dwarfs in Dwimmmermount reproduce by sculpting their own children.
None of these ideas are particularly original, but that's part of the point. When I'm making my game of D&D, I'm not trying to radically inverts the D&D tropes. I just want to play around the edges. I want to mix the good bits of the fantasy games that has shaped my view of fantasy gaming. If that recombination produces the littlest bit of novelty will be enough.