Just my two cents'...
Simply apply the size modification rules to the basic (3.5) gnome:
Tiny size (+2 BAB, +2 AC, +8 Hide checks, 50% carrying capacity)
Base Speed 20'
Str -6, Dex +2, Con +2
Low-light vision
Weapon Familiarity: Gnomes may treat gnome hooked hammers as martial weapons rather then exotic weapons.
+2 racial bonus on saving throws against illusions
Add +1 to the Difficulty Class for all saving throws against illusion spells cast by gnomes.
+1 racial bonus on attack rolls against kobolds and goblinoids (including goblins, hobgoblins, and bugbears
+4 dodge bonus to Armor Class against monsters of the giant type (such as ogres, trolls, and hill giants):
+2 racial bonus on Listen checks
+2 racial bonus on Craft (alchemy) checks
Automatic Languages: Common and Gnome. Bonus Languages: Draconic Dwarven, Elven, Giant, Goblin, and Orc. Gnomes deal more with elves and dwarves than elves and dwarves deal with one another, and they learn the languages of their enemies (kobolds, giants, goblins, and orcs) as well. In addition, a gnome can speak with a burrowing mammal (a badger, fox, rabbit, or the like, see below). This ability is innate to gnomes. See the speak with animals spell description.
Spell-Like Abilities: 1/day -- speak with animals (burrowing mammal only, duration 1 minute). A gnome with a Charisma score of at least 10 also has the following spell-like abilities: 1/day -- dancing lights, ghost sound, prestidigitation. Caster level 1st; save DC 10 + gnome's Cha modifier + spell level. See the spell descriptions.
Favored Class: Bard
Don't forget to enforce smaller weapons, using the rules from the DMG, page 162. No way your tiny gnome is wielding medium-size weapons, and small weapons would be two-handed for it.
Also, while the -6 Str definitely hurts, I think Tiny size balances it nicely. A +2 BAB and AC and +8 bonus to Hide checks would be helfpful for any non-fighter types, especially spellcasters.