When I was a kid, my main models for gnomes were:
1. The Nomes from L. Frank Baum's Oz books, who were wicked and unpleasant. 2. The gnomes from The Silver Chair by C.S. Lewis, where they were slaves of the Green-Witch helping their mistress in her attempt to conquer Narnia. 3. The G'home Gnomes from Terry Brooks' novel Magic Kingdom For Sale—Sold!, who were stupid, greedy, and unpleasant. 4. The gnomes from Gnomes, the classic coffee table book by Wil Huygen, and The World of David the Gnome, the cartoon inspired by it, who were all twee and unpleasant. 5. The hypothetical gnomes that I was semi-convinced infested my house and caused things to fall unexpectedly, like poltergeists or boggarts. 6. The garden gnomes in my grandmother's yard, who were suspect (for the above reasons, I assumed every gnome was plotting something). 7. The tinker gnomes from Dragonlance and Spelljammer, who were appealingly funny but completely inept.
So I didn't like gnomes very much. It didn't help that they weren't a PC race in BECMI D&D, which is the flavor of D&D I originally cut my teeth on, and the Red Box Basic Set said "They love gold and gems and have been known to make bad decisions just to obtain them," which wasn't an appealing trait (though it appealed to me because I hated gnomes and appreciated any anti-gnome propaganda).
So it wasn't until I moved to (2nd edition) AD&D (at my players' request) that I started to come around to gnomes. In 2e they were tricksy illusionists and the only PC race to get an intelligence bonus. A story I read in junior high, written in a student publication, made much of gnomes being the most intelligent of races and that made me consider that they might have worth. But in AD&D their trickiness was sometimes treated as sadism (for example, the gnome brigands in The Book of Lairs II) so they still didn't come across that well.
So it took me a while to come around to gnomes.
In general it's hard to use gnomes because their role in the fantasy world has never been as clear cut as elves, dwarves, and halflings. Dwarves are stalwart, taciturn miners and engineers. Elves are slender, beautiful tree-huggers. Halflings are phlegmatic farmers who live in holes. Tolkien didn't use them except as another name for the Noldor elves. So what are gnomes? Like dwarves, but smaller and greedier? If they're tinkers and engineers, what are dwarves, who also have inventing/engineering skills in The Dwarves of Rockhome gazetteer?
2nd edition AD&D made use of the tinker stereotype while making its gnomes less inept than the Dragonlance ones. The Complete Bards Handbook gave us the gnomish professor kit. The Arms and Equipment Guide gave us gnomish armor, which is covered with tools and pouches. But 2e also had trouble thinking of things for gnomes to do, forcing them to share a book with halflings when the Complete Race series got around to them.
3rd edition amped up the "tricksy illusionist" angle by giving all gnomes inherent illusion magic, regardless of their character class.
4th edition actually created a recognizable niche for its gnomes by having them replace the brownies, buckawns, leprechauns, and other benign wee folk of previous editions. Gnomes stood in for all faerie commoners and craftsmen, while fey nobles were eladrins. Their backstory was that they were enslaved by fomorian giants.
But Blackmoor. We were talking about Blackmoor.
It's understandable that they're a minor race in Blackmoor because they weren't a PC race in OD&D or BECMI until Top Ballista and the Rules Cyclopedia. The Hollow World boxed set said that Garal Glitterlode didn't create them until BC 2,900, a century after the Great Rain of Fire ended the Blackmoor era. Zeitgeist Games made a place for them because they tried to make a place for all Player's Handbook races in both 3e and 4e, but could probably have a more distinctive place in the world. The authors closely tied the gnomish pantheon to the dwarvish one, and the creation story there is that the gnomish god Charis was created when the dwarvish god of magic first touched the earth. Gnomes, then, are related to dwarves but touched with magic.
In Mystara, Garal created the gnomes after the dwarvish race he had been born from was dying from radiation poisoning, replacing them with a race that was smaller and more adaptable. One idea is to bring that idea to Blackmoor but instead of using the Great Rain of Fire as a catalyst, use the wars against the orcs (or beastmen) or the Mage Wars (or something even earlier, like the War of the Pious and Philosophers in the Wilderlands setting) as the reason that Mieroc or Charis felt the dwarves had to be recreated into something more flexible. Mieroc could easily be another name for Garal, and Charis could be Terra.
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