Okay, I have to report this as a bug, because I have NO idea WTF is going on here. I am trying to save the Grymforge gnomes, but after four tries of this, I can only conclude there's some bug causing this.
I have talked to the gnomes, I have dropped the smokepowder satchels next to the cave-in, then went a safe distance away and ignited them. They blew up the rockface and opened the cave in entrance. But immediately afterwards, ALL the Duergar in the area go hostile and attack. I've tried this four different times now in different ways, and it's the same thing: after the explosion, every Duergar goes hostile.
I have everybody at max level with the best gear I can manage, but even if I pre-buff the party, I get killed in two rounds just from sheer numbers. All the Duergar are getting at least 2 attacks, so that means they're level 5. My party has been wiped 4 times by this, so I'm REALLY calling this some kind of a bug.
Anybody else had this problem??
All I can say is that, for me, when they go hostile, it's because a gnome walks into the resulting fire from the explosion and takes damage. That triggers the hostility.
So it's somewhat about luck and somewhat about positioning of the explosives. You can always try to Create Water in turn based mode immediately after the explosion, putting out some of the fire that otherwise triggers the attack.
That said, if you chose to fight all the Duergar, it can be a tough fight. But it is something you can win.
(Maybe a little bit of a spoiler, but... You can get some of the Duergar to help you in the fight. Specifically, the ones who want to get paid by Nere and feel they have been shafted thus far.)