I'm sad about the lack of the shorter races too.
So am I.
Now that I think about it, it may well be a dev time cost that they didn't want to spend. If just the PC can be short, then you only have to program for male and female scenes with at most one short (or tall for Dragon born) partner in one configuration. If you include both extra sizes as NPC relationships you just tripled the number of scenes you have to account for. That's a lot of dev work.
In addition to just short-normal, normal-normal, and tall-normal; you have short-short, short-tall, normal-short, normal-tall, tall-short, and tall-tall.
I give Larian the benefit of the doubt that this might have been the reason, but most likely, we'll never know if this was the case.
But personally, I think that this is such an important part that they should have invested a bit more dev time in this.
And I would have preferred if Swen hadn't made jokes about halflings and gnomes, too.
I am a bit boring and mostly play elves or tieflings, but I wouldn't make jokes about halflings, dwarves or gnomes.
(Something completely unrelated: does anybody happen to know what kind of dialect Nettie speaks?)