Epiphany
Proverbs 17:9
I don't know but I've always felt Gnomes were more reminiscent of nordic mythologie with the Nisse, like mischievous creatures who liked playing pranks. It is only with WoW and the current video games that they really earned their more tinkerer reputation.
Also, I may be wrong but only dwarves live underground?
They have three pretty different culture and origins! It's like saying, yeah Nordic countries are all the same, they basically speak the same language and eat the same stuff right? Why do we need Denmark, Sweden, Norway and Finland?
Oh, I suspect the mythology informing gnomes, hobbits and dwarves probably does vary. As memory serves, all three do prefer underground but dwarves like mountains, gnomes like caves/hills and halfings like burrowing. Dwarves like beards, halfings don't and gnomes are somewhere in the middle. They all live longer than humans but not as long as elves.
I like your Nordic country analogy, though. We do have Denmark, Sweden, Norway and Finland and they aren't the same...but they are populated by the same species who are just culturally variant. Put another way, elves in Forgotten Realms came in Sun, Moon, High, Wood, Star, etc. In Dragonlance, you had the Silvanesti, Qualinesti and Kagonesti. The latter even have their own distinct languages like gnomes, dwarves and halfings.
And you could accomplish the same thing by making them distinct cultures, not distinct races.
Like...let's say you have the Demifolk Race the way you have the Human Race.
Humans in the nation of Ferris might speak Ferric and be called Ferricans but their species is human.
In like fashion, Demifolk in the nation of Thorbardin might speak Dwarven and be called Dwarves but their species is Demifolk.
Gnomes in the land of Barovia might still speak Gnomish and their ancestors hailed from Granitehome and they call themselves Gnomes but their species is still Demifolk.
My (incredibly) unpopular opinion is that treating dwarves, gnomes and halfings as genuinely separate species with mechanical differences despite incredibly similar design makes as much sense as coming up with separate mechanical traits for Americans vs. Africans or Chinese. Let culture be the real variant, the way it actually is in real life.