Dwarves don't have to be short. Dwarves in original Norse mythology were in fact not short at all.
http://en.wikipedia.org/wiki/Norse_dwarves
They were also related to metalwork, craft and technology like the Dwemer.
Nibelungen
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Sigurd kept breaking his ordinary swords, till he had some Nibelungen (a race of Dwarves) craft some sweet goodies, specially for his dragon-fighting quest. It was powerful, cool and all that... And it broke too, so he kept bringing broken swords to those dwarves who'd look up at him, shout, complain, work, repair, get lonely - all that, till Sigurd came back AGAIN with the same broken sword.
Apparently heroes do not learn their lessons.
Speaking of which, this Dwemer / Dwarf stuff... Why do we see Dwarven Daggers, Dwarven Hammers and such in Oblivion? This can only be referenced to Dwemer....