I like 'em both.
Halflings are the romantic gypsy/scrappy lil' survivors of the world. I don't see halflings as cute at all...potentially dangerous, actually. But I do see them as insular in a wider world. Re-reading Lord of the Rings gives me some ideas; halflings exist to enjoy the worldly goods of life while they can. They can be ambitious, but power and riches hold no inherent draw for them. They'd rather be happy than be in control, and that feeds through the nomadic, wandering aspect of them -- they're always in search of something that would make life a bit easier, that would cushoin them a bit. I like the 3e halflings well enough, because it actually makes sense that a lot of them are Rogues. To be a hobit-ripp-off, you had to be a mutant cousin from a race that liked sitting at home. The 3e halflings still like sitting at home well enough, but they're also eager to find things that would make their homes better off.
I find the mythology of the halflings absolutely fascinating, too. Yondalla is a paladinesque earth-mother that *isn't* one of the iconic members of her race. She fullfills a role of leader and protector that few halflings take upon themselves.
The gnomes are awesome in their own right. Imagine the little people poking out of trees in the woods -- these creatures are the gnomes, those who are a bit fey themselves. They lurk in the shadows, accumulate knowledge, share it amongst themselves. They're rather innocent of the destructive nature of some of this knowledge, and often persue it for it's own reward. They're the guys who would make fireworks that would never be used as weapons, because they've got a lot of knowledge and no desire to blow up others.
They're tricksters, shadowy figures that giggle out of the corner of your eye but dissappear when you focus on them. They're faries without all the inherent abilities.
IMC, gnomes are also the heralds of psionics (what with their own obsession for gems).
Either way, they're secretive keepers of lore that lots of people would like to get their hands on, but few can. They have a remarkable ability to slip through the cracks when they need to, and that's expressed in their illusionist powers.
I like all the races quite a bit. About the only one that's even close to getting on my nerves are the Elves, and that's just because they're overdone and trite for the most part. I want to explore regions that haven't been done.