This coresponds to something in Dark Sun's past too, doesn't it? There was a genocide against gnomes, right? It might be that the denizens of the Feywild found out who was destroying their world. In the core setting, gnomes are sort of like guerilla freedom-fighters, so in Dark Sun, they might've sent gnome assassins to kill the defilers. Only it didn't work, and as a backlash, the defilers instituted a pogrom of clensing.
Heh. Keen. That explanation jives with me, though I'm not sure much of an explanation needs to be given beyond the basic: "They died because of Rajaat's Cleansing Wars + the destruction of the Feywild"
PS:
HERE is the official story for why gnomes, and a lot of other critters, died out. It's kind of a cool story, and basically why Athas is the heck-hole it is today. It's basically a story about a genocidal maniac who discovered Defiling magic, and thought Humans were the True Race of Destiny (when it was Halflings, which is hilarious). To me, the specifics of which races were actually successfully "cleansed" is kind of irrelevant, beyond the basics. It makes sense that inappropriate races like Eladrin or Gnomes or Pixies would be killed off, but other races were killed off too (lizardfolk, kobolds, whatever); some succeeded, some didin't.
What's important to me was that Rajaat's Champions lead some successful genocidal campaigns against creatures on Athas. That there are multiple successful genocides in Athas's history is a huge change from most fantasy, and a big part of the whole "The Bad Guys Won" feel I get from the setting.
The whole "some major PC races have been the victims of successful genocide" thing is pretty important for the feel of big-time evil, I feel. If just so that the answer to "Why can't I play a gnome?" is "Because they were all murdered hundreds of years ago."
And that also raises the possibility of "Maybe it wasn't as successful as they thought!", which, for a unique PC, is OK, but it would be something I would not want to repeat more than once.
But that's tangential. Your idea is keen, though I don't know if we need (much of) a reason for the death of gnomes beyond "Rajaat was a Very Bad Man who did Very Bad Things."