I want to jokingly point out that the dwarven subrace you want is in the Player's Handbook: the rock gnome.
But I totally think a dwarven subrace like you want would be an excellent addition to the game - to the point where I know miss its presence in the PH.
Heh, I was thinking similar.
If you have a Human-size Dwarf, using Rock Gnome stats, for alchemy and magic item creation, ... then you basically have the Norse Dwarf (Dvergr).
Something like: +2 Intelligence − the ‘cunning of the dwarves’ meaning magical technological expertise, plus +1 (or more) Strength. They can lift and hold extremely heavy weight.
Typically, the Norse Dwarf has pathetic Charisma. They prefer to live a dormant lifestyle, standing cold and dark inside stone, and often are only motivated into action by envy, greed, competitiveness, and revenge. They are responsible for all of the most powerful magic items, and all kinds of Human technologies too, if I remember correctly, even boat making. Heh. Even tho these Dwarves are extremely powerful, often more powerful than other nature spirits, no one seems able to take them seriously.
This kind of Dwarf is as tall as a Human, maybe slightly bigger than a Human. Viking Age carvings illustrate them as about the same size. They can be mistaken for Human, but have sunless, deathly pale skin. The idea of a short Dwarf comes later from foreign influence, from German (and Anglo-Saxon) literature, especially stories about a specific famously short German Dwarf named Alberich (whence Icelandic Alfrikr, French Oberon, etcetera).
The Norse Dwarf is Neutral, neither especially lawful nor chaotic. Probably, not necessarily evil. Self preservation is the main ethic, but otherwise they ignore Nondwarves, if possible.
Oh, and they petrify in direct sunlight! (Heh, and one might think Drow have troubles.) But this kind of Dwarf usually casts spells of magical mists and fogs to protect themselves if venturing out into broad daylight. Sometimes called the ‘children of the mist’. Many human-looking stone formations are indeed once a Dwarf who got careless. They call the sun the ‘game of Dvalinn’, the ancestor of all of the Dwarves. A Dwarf reaching 0 hit points, petrifies. Probably the Dwarf is vulnerable to radiant damage, and direct sunlight counts as radiant damage. As one might guess, they are normally nocturnal.
Actually, the Norwegian name Svirfneblin probably contracts the Old Norse name, Svartalfneblinn (Svart’lfneblinn), meaning, ‘The Black Elf Mist’, and a nickname for this kind of Dwarf in daylight. ‘Elf’ in the sense of a source of good luck (sort of like ‘angel’), ‘Black’ in the sense of deadly, cruel, and dangerous. Also, the Dwarf is known for the characteristic black hair that contrasts the pale skin.
They live inside stone. Probably this is best understood as an extradimensional demiplane, being the size and shape of the stone, and contiguous with both the Materia and the Feywild planes. Aside from this shape and contiguity, it is alot like the Demiplane spell. There is even a story, of one Dwarf trapping a Human inside one stone, similar to this spell.
And they make items and magic items, and all kinds of technologies, including elemental alchemy: Frost-Fire-Wind, combining as primordial white muck, becoming stone, and eventually refining as pure gold.
Given D&D the way it is, this kind of Dwarf might work as a muscular Human-size ‘Gnome’ with +2 Intelligence and +1 (or more) Strength. Too bad the name Svirfneblin is already taken, but it isnt too different from this. An update might still be possible?
One could argue the Dwarf and the Gnome are the same race, one inhabiting the Material plane and the other inhabiting the Feywild plane, similar to Elf and ‘Eladrin’ Fey Elf. Svirfneblin can be ancestral to both Dwarf and Gnome. In the context of D&D, they might even both be native to the earthy Material plane, with the Gnome immigrating from the Material into the Feywild.
It was a fun version of GW. 
