I don't think gnomes and halflings get a fair shake in most campaign worlds. No one ever really concentrates on them, and the best "flavor" examples I can recall are Tinker Gnomes & the barbarian Halflings from Darksun (those buggers were hard-core!). While those are great examples, now ten(?) or more years after these have been out I find that people either forget them or recycle these two ideas. I find myself thinking of them as cliche even!
I think the descriptions given in the PHB (like some people above have noted) feel like someone decided on keeping them regardless and tried to fill in the blank of why at a later date. I guess their editors didn't like "cause I want them here" as a racial description.
As such, and because the descriptions always felt very bland and afterthought-ish, I have been trying to explore other possibilities and motivations for those two races. I've been considering some racial-based ramifications on how they would interact with other races on the whole. Alot of those considerations are topics that are against the rules of the board though, so I'll just leave it at that.
All that said, I think that's the real problem. Their descriptions are blah. They don't inspire me to include them in anything or base story concepts around them. Even Half-Orcs have more to offer from just their description than Gnomes or Halflings. No conflict given... that's the problem!
Humans are the exception to this, because people (obviously) relate to humans... our minds fill in the blank from real-life, history and works of fiction. The description could say "they're human. Nuff Said" and it would really be enough. You *know* humans already. The rest of the races need the special help.