Dwarves are perhaps the opposite of S'Sirthe in Leylines. They are not good at rushing and their units are generally not very mobile, but in the long run they can be nearly unstoppable.
Perhaps the key dwarf units are the miner and the caravan. With miners dwarves can greatly increase their income. A miner harvests gold, similar to goblins. Rivers and mountains are best, both producing 3 gold. On rivers, building a fort will make miners even more efficient, as The Mystic said. A mountain, on the other hand, offers better natural protection.
Caravans can be used to relocate worker output from one city to another. This is great in the beginning of the game, when the dwarves desperately need to set up a quick early defense against any opponents that could attack them early. If starting with three cities, you can climb the tech tree exceptionally fast in one city by building caravans in a second city. This way, you can very quickly establish a solid early defense of a few slayers backed by chanters.
Once early defense is covered, it is time to scout and start expanding. The strength of dwarves is build, build, build. Build roads toward your enemy, with dependent units you are almost guaranteed to benefit more from it than your opponent. Build extra cities. Climb the tech trees and build yourself an ever stronger army. Dwarf units may be dependent and somewhat slow, but they are really tough. Plus they have beards.
Magic is a very difficult choice. Any mix of body, mind and chaos magic offers very nice advantages. Only energy magic seems less attractive, for example magesight is already built into slayers so you hardly need it as an enchantment. Some magic highlights:
Aethereal Path (B) is fantastic for dwarves, anything that helps you move means less worries about being dependent.
Gaea's Bounty (BB) is great, because dwarves can't improve terrain in any other way.
Imperviousness (BBB) can turn the already strong dwarf units nearly invincible. Just try to avoid assassins and envoys and reaper's touch and dominance and.. well you get the point.
Revelation (M) is one way to make up for lack of cheap scouts.
Ancestral Learning (MM) you think slayers are good? Try dragonslayers.
Mind Shield (MM) Is the best way to protect your dragonslayers from nasty incidents like insanity, reaper's touch or dominance.
Translocation (MMM) If dwarves ever get this spell, the game is probably over.
Flicker (C) is another way to speed up exploration
Degenerate (C) can be used to increase the efficiency of miners, or to save dependent units without supplier in cases of emergency. An interesting idea is to build many undead firewalkers, because they have extreme resistance to exorcism attacks.
Insanity (CC) is one of the few combat preparation spells that dwarves can actually afford to cast with their typically low mana output.
Tempest Ward (CC) is another great spell for dwarves. Their cities are normally well defended but vulnerable to spells, especially Scorched Earth. Tempest Wards are a failsafe solution, as even Major Cancellation can't break it.
[Last edited by grobblewobble at 01-21-2011 10:35 AM]