Having 1 small race has nothing to do with having another small race.Gnome barbarians
Why? Dwarves at 4-5ft are close to human height and broad and stout enough so they dominate their 5x5 space. Its the dominanting bulk that makes them medium.
Plus if Dwarfs are small then that just means even less reason to include Halflings and other small races who failed to clear their orbits.
(my gnomes are all under 2ft, so a Tiny race)
Good thing Powerful Build isn’t “you are medium for that, that and that.”From mechanics point of view it's more elegant simple -5 move speed, rather than; you are small for this, this and this and you are medium for that, that and that.
The grappling doesn’t bother me. Not being able to use heavy weapons (without disadvantage) is a good point though."Powerful build" only exists to allow for "bigger" races without giving them the huge mechanical advantages of being Large size.
Likewise, being reduced to Small size would be a noticable nerf to dwarven warriors, as they would no longer have access to heavy weapons or be able to grapple anything bigger than a human.