Gnomes and Dwarves have a lot in common. Too much honestly. We need to separate ourselves from our dwarven cousins if we want some legitimacy.
So what do Dwarves and Gnomes have in common, and how can we put ground between each other without back peddling who we are?
Living underground – As far as I am concerned Dwarves can keep this one. We gnomes have no affinity for the earth. We only live underground because that is where the titans left all the stuff we were supposed to guard/archive/maintenance.
Created by the Titans – Sure maybe we were both created by the titans, but we might be more different than that lets on. Dwarves are created on Azeroth with samples from it’s native geological stratus. Gnomes could have been brought to this world after being created somewhere else by the titans. That would put an interesting spin on things.
Engineering. – Gnomes are well known for building amazing devices. Dwarves are well known for gunpowder. I think the compromise here is obvious. Instead of going to some creepy goblin town to learn to blow stuff up, learn it from the dwarves! Gnomes will keep our mechanical engineering (an all our fingers) while dwarves can can on demolitions.