Dwarves

Dwarves were created during Xylian Dominion's first attempt at geneengineering a slave species whose existence could free the Xylians from the burden of menial work. Dwarves were supposed to be tough, resilient and precise - a perfect craftsmen, probably supposed to serve as a template for future subspecies dedicated to less 'heavy' things, like cleaning the Xyls houses and magic.
They, however, suffered some catastrophic (at least from Xylian perspective) failure in their genotype that made them short. Too short for Xylian taste, after all employing them on a wide scale would force major reconstruction of infrastructure (especially things like factories) to cater to them. Because of that, the project was scrapped. Dwarves themselves, however, weren't. Xylians instead settled them in two parts of their Dominion and allowed them to exist.
They have become what was essentially Dominion's client states, at least partially descending into the Labyrinth to avoid the ever-watchful eyes of the Dominion. They had to pay for their lives, of course - the yearly tribute in various resources is what made them such an accomplished miners, smiths and engineers. And it wasn't a low tribute. As a result, dwarves have eventually developed an intense dislike for the Xyls and, by extension, their younger cousins - the Elves, the favourite 'child' of the Xylians.
This is a hatred that is entirely one-sided, though. As the dwarven elvenphobia essentially made the dwarves self-isolate and keep away from the elves, who never really had an occasion to further infuriate the dwarves, at least until the dwarves invaded the elves during the Mountain Wars - because then the elves over-response has greatly reinforced the negative stereotype about them.

Basic Information

Anatomy

Anywhere between 1.4 and 1.5 meters high, generally quite impressive musculature and humanoid form (two legs, two arms, one head). While they are lower than humans, they are also slightly wider and notably stronger physically, equally in terms of sheer strenght and endurance. On the other hand, they appear to struggle to float in the water, making them horrible swimmers (and indicating that the xylians has did something to their body density).

Biological Traits

Genders

Dwarfs for some reason suffer from quite extreme gender dymorphism. While their males are wide, muscular and with impressive beards, their female actually look like an average (but shorter) human woman of a bit 'wider' built. They actually undergo period of looking like completely normal-looking human children (and teens). The differences appears especially noticeable with their hands, with the males having them almost grotesquely wide and tough, while females have them way more delicate.
This is reflected in their society, where the married pairs often work together. The males provide heavy labor, while the females are responsible for the finishing touches (for example, the decorations on the newly crafted piece of armor).

Subspecies

There are three main subspecies of the dwarves, two of them created by the Xylian Dominion and one being a way later creation that most people would generally prefer to have never been created. They live in separation, although one that has less to do with their isolationism and more with the distance between them (and all the foreigners living between them).
Dragrims are what can be considered to be the 'main' dwarven civilizations, centered around the White Mountains region and the Labyrinth beneath it. They are the standard, stout, and fiercely isolationist dwarves. While isolationist, they aren't above trading with the outsiders, though they do that outside of their fortresses, in a number of designated market towns and do not allow anyone but a few respected 'friends' to go deeper into their lands.
While great craftsmen, they are barely holding against the onslaught of the economies of their dark elven competitors, whose close ties with the Grand Empire led to them occupying the common dwarven niche in fantasy worlds, that of craftsmen often living in their own enclaves within human countries, providing them with their labor in exchange for access to their resources.
Dvergars are a significantly less xenophobic (but still isolationist) branch of the dwarves, whose civilizations is focused on the isle of Aeriu. Unlike the dragrims, the dvergars are mostly living on the surface and have taken to a mostly agrarian lifestyle. They are still good craftsmen, just ones that prefer leather, skin and surface-harvested stone to mining.
Their kingdom is de iure part of the High Kingdom of Alvaena (and through it, the Empire), although since the Synkardian War they are de facto a client state of the Grand Empire.
Draams are descendants of dragrims who at various time of their history decided to say goodbye to their lives as tributaries of various surface powers and descended deeper. Away from the elves, Xylians and humans. Unfortunately, some of the draams has descended way too deep.
Today majority of their civilizations has fallen to the Pentagram, while the rest is spread throughout the Labyrinth and busy doing sometimes rather horrible things to survive another day - while often being to a various degree under unconscious Pentagram influence.

Genetics and Reproduction

Dwarves can theoretically have children with other xylmade species, however the result will be sterile and with extreme chance of various birth defects. The dwarves themselves are rather xenophobic (in the isolationist way rather than genocidal) and thus are far less influenced by this problem than for example the elves.
On the other hand, they are free to have children with very supernatural species and the spirits.

Dietary Needs and Habits

Due to their expanded musculature they suffer from the similar problem as for example ogres - they need a lot more calories that average human, especially when they work or fight. Hence their preferrence to meat and beer.

Additional Information

Facial characteristics

Expansive beards and moustaches that they often decorate with beads. Black hair. White skin (varying between pale and slightly olive depending on the place they live in and so on.

Subspecies

Dragrims
Dvergars
Draams