Tangently, Elf/Dwarf animosity has never made much sense.
In my game, somewhat exaggerated, you can think of Dwarves having a culture similar to naked mole rats. They are highly social and have a high degree of disease tolerance. They are cosmopolitan. They like to be pressed up against each other in small spaces. They have almost no feelings of claustrophobia. They do get feelings of agoraphobia. They have a high degree of gender dimorphism. They are the only race with a large divergence from the 1:1 ratio of genders, with many males per female. They practice a sort of (theoretically) chaste, chivalric, polyandry where a married couple is supported by retinue of unmarried males who are pledged to the couple. They obey rules, tend to have highly regimented societies with caste and social distinctions. Their ideal society looks like perfectly organized industrial societies where all the resources of the land are harnessed for the the benefit of the society. They are 'wierd' and when they go weird they go weird in weird directions. They are warlike, like to brawl, heal quickly from injuries, and like to be up in people's face giving very physical affection.
By contrast, Elves are arboreal vegetarians that are only semi-social and for much of their youth often have closer ties to animals than to other elves. They experience squeamishness about almost every aspect of urban culture, in no small part because they have relatively low disease tolerance. They think having a neighbor closer than a half-mile away is a bit weird. They don't particularly like crowds. They are xenophobic. They have a reputation of shooting first and asking questions later. They think eating meat is weird or even barbaric, and they typically only do so in emergencies. They have very low degrees of gender dimorphism. They barely practice anything the other species would think of as government. They have loosely organized societies that like to deal with arguments by just putting more distance between you and the person you disagree with. Their ideal society looks a lot like barely groomed nature. They are 'weird' and when they go weird they go weird in weird directions.
It's not that they often come into direct conflict, but when they do they just don't understand each other. Each considers the other alien and aberrant. They don't have the same biology. They don't have the same inclinations. They don't have the same culture. But what both species have in common is that they bear grudges. The elves long life means they have long memories. The dwarf's sense of familial honor means that whatever happened to great-great-great-grand-mama is still a personal insult to them, and they remember who gave it. It makes for explosive feuds.
Anyway, both directions I'm going could be cliche. My problems with "evil" races aside from Powered by Evil creatures are 1.) why aren't they extinct?...
Because the goblins are a tough as nails: even the dwarfs grant them that. They are pretty much at war with five of the other six Free Peoples, and fighting them all to a stalemate. After humans, they are probably the most numerous species on the world, with the largest claim of territory.
or 2.) why aren't they the dominant species?
Because they are at war with five of the other six Free Peoples, and because in particular, despite their massive breeding potential, the fact that they are obligate carnivores limits their ability to maintain large populations. Compared to the humans ability to turn any arable land into a massive amount of storeable grains - grains that the goblins can only eat in small quantities without getting sick - the goblins just can't compete. The other four good races can always in a pinch survive on human produce when a war turns against them.
Mind you, this is a less than jovial alliance. The Dwarves and the Elves tend to think that the Humans are hardly better than goblins, and the humans spend most of the time fighting each other (or the Orine, or occasionally the Dwarves or the Elves) continuously.
As I know it's going to come up, the MST3K mantra is fine when you're a teenager. When you're older, you have to think about how a world would work believably.
Yes.
