Shortfolk of D&D

Dwarves as a core race, children of the primal fire god, gnomes as their smaller, much smaller, subspecies that live in more temperate areas.

Dwarves live mostly in the colder inhabited nations due to their hardiness, but they can be found nearly anywhere in at least small number.
I don't prefer the "Race = Culture" notion either, but in setting you'll likely find a lot of casually racist NPCs that feel that way about all the other core races.

>>55077231
Goblins as a subspecies to the core race of Orcs, and with the right socio-economic pressure can produce "Goblin Majors" in a community. Goblinoid folk who are the "super-human" version. When enough orcs and goblins are around in a single community you might see a few. They are taller, faster, and much more capable of complex thought. In the only place in the world where this occurs they are used both as military and spiritual leaders in their communities.
While their physical strength still doesn't match their orc bretheren, they are still extremely valuable to the community.

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>Remove all the short races
>Replace them with one homebrewed short race

They're one of the major races and are fond of exploring. And riding elephants. And fighting horrors that come from the moon. And huge fucking hips. And...

>>55077178
The only things taller than Halflings, Kobolds, Goblins, or Gnomes are baddies and monsters.

Three words

Halfling

lolicon

brothels

>>55077178

Goblins and Kobolds being upgraded to core races doesn't seem weird to me. Cannon fodder enemies always make the most sense as heroes because their high birth rates means that

1. The constant strife of numerous tribes means that many displaced warriors and refugees will be produced, some of whom would invariably attempt to integrate into the fringes of civilized society.

2. There's more chances for the odd neutral or good aligned monster to be produced

3. They're common enough that the average townsperson would say "Oh that's just a goblin mercenary. Yuck." Where as if a fucking Dragonborn walked in the guard would be called or every conversation would start with stunned silence.

>>55077178
Dwarves aren't a small race. They're shorter than humans, but so are elves.