Well I think there WERE dwarves in skyrim. Problem is TES dwarves are'nt small, nor build undergroud cities.
Not small, but I would say their cities do qualify as underground, at least partially. For most of them, the lower areas were collapsed or inaccessible and you could only explore the upper levels.
Totally underground doesn't seem like the Nordic style IMO, though maybe a mountain/cave settlement is possible.