While I'd certainly allow players to play as gnomes - I find that gnomes and halflings aren't well differentiated. There doesn't seem to be two distinct niches form them to fill, which is probably why a lot of the non-core subraces in 3.5 seem to be assigned randomly between the two. The writers couldn't remember which had which fluff.
Therefore, in my homebrew settings, they're one race. They call themselves gnomes; other call them halflings. Players can use either set of mechanics, depending on which fits their character concept better.