Petty Dwarves

[Durin1]

There is also that cryptic statement that Dwarves dwelt in Beleriand long before Elves came over the mountains.

Taking the point of view that the Dwarves couldn't have woken much long after the Elves, they must have had time to wander aroung the place, naming things etc. The statement would infer that Dwarves must have travelled quite a way into Beleriand but must have decided to set up in those places which were convenient to their needs i.e. the mountains or large hills. An example of this is when Mim tells Turin about Amon Rudh. Together with Nargothrond they would seem likely enough places for Dwarves to habitat.

[Eladar]

We are told in The Sil that the Petty Dwarves were outcasts from the other Houses of the "normal" Dwarves. It is nowhere explicitly mentioned (as far as I can gather) why they became outcasts or renegades.

There is this from The War of the Jewels

The great Dwarves despised the Petty-dwarves, who were (it is said) the descendants of Dwarves who had left or been driven out from the Communities, being deformed or undersized, or slothful and rebellious. But they still acknowledged their kinship and resented any injuries done to them. Indeed it was one of their grievances against the Eldar in Beleriand before the Elves came there. This grievance was set aside, when treaties were made between the Dwarves and the Sindar, in consideration of the plea that the Petty-dwarves had never declared themselves to the Eldar, nor presented any claims to land

They were driven out for being too short, lazy and rebellious.

It is rather sad that Dwarves thought being short was some how inferior.