Let me just say that I have not, nor do I ever really think I will, play a Halfling character.
Let me also say that I played a Gnome Druid in 3.0 and he was one of my favorite characters I've ever played.
However, if it comes down to one or the other, it has to be the Halflings. Why? As it's already been said, Gnomes don't have a niche. Personally, I love Dragonlance's tinker gnomes, but they don't fit into every campaign setting, and mechanically, PHB Gnomes aren't really geared toward being good at intellectual pursuits (silly D&D and it's no +2 Int for ECL 0 races). Plus, as much as I like WarCraft, WoW has taught me that Gnomes, if left unchecked, will build a reactor and Chernobyl themselves into a nuclear apocalypse.
At least with halflings, they're only going to steal your gold, maybe stab you in the kidneys, or invite you into their Hobbit-holes for tea...Gnomes? They'll irradiate the groundwater.
Robert "Jackrow Bezling Stymquvf Ph.D. (Druid of Philosophy)" Ranting