I can envision Corellon, Garl and their elf and gnome warriors not hesitating to carpet bomb a village with fireballs even if it would mean the destruction of children of the evil races. That's incidental casualties, and can be justified away as "too bad" because their parents need to be dealt with.Corellon Larethian has no problem with the wholesale slaughter of Dark Elves, Garl Glittergold is all for using powerful evocation magic on Kobold communities
If it came to the scenario whereby cowering children were left among the rubble, I can envision Corellon, Garl or their followers having mercy on the children. I doubt that Corellon or Garl are interested in outright genocide of the evil races, more about pre-emptive strikes to break their power, and reduce the threat they present. Even the hatred that the dwarves and their gods feel for the goblin races may not extend to their outright destruction, even in the face of a thousand generations of blood oaths. I can easily envision hardened dwarven veterans of good alignment granting mercy, one way or another, to goblin children - they know that to do otherwise would make them little better than duergar or derro.