Dude, they have 7' tall dragon born. They have drow which are really short even in comparison to other elves often being under 5'. They already have dwarven PC characters so clearly having dwarves and other short races in cutscenes is not an issue. To my knowledge, all the romancable characters can be romanced by the short races so that's not the issue.
If YOU can gave a bear to have sex with (not for me, but hey, its an option); I should be able to have a dwarf woman to have sex with. Equality, right?
One of the issues I've seen regarding Dwarves, Halflings and Gnomes is how they can be mistaken for children, height-wise. Especially when it comes to sex scenes, it might look very weird and some might have been put off by that.