Related but unrelated, I think when Clyde Caldwell and others first illustrated the Halflings for Greenwood and such, they were still very much in the Hobbit mode of depiction, like the way Lee did them or Howe or Nasmith. With the village hobbits being more portly and comical, and the venture hobbits going more lithe and athletic or human-like, but still essentially the Shire. But then after the Tolkien estate sued TSR and they went more Halfling Hin with it, I think that is when the idea really opened up that they could be more like 1:2 scale Lilliputians (like from the old movies I mean, where they did it with actors in double projection to trick the eye) rather than the proportions of the Tolkien Hobbits.
To be fair BG1/2 had the models pretty archetypal hobbit lookin' for the paper doll, especially letting the dogs breathe with no boots hehe. Even in the 5 Shires though, you can see the illustration branching out to show quite a variety, and many of the halflings shown have much more proportional figures. Later you really see a kind of split in the depictions. I think the more human-esque proportioned the Halfling characters are, the more they become attractive as a PC choice.
I think Dwarves have a different sort of appeal where you really like to see a more stocky figure like the ones depicted above as Halflings. I wouldn't mind if all the current Halfling models all became Dwarven models, and they went back to Halflings with all new animations/phenotypes and a whole new smaller scale.
The Halflings should stand right about at the elbow height of Shadowheart/Gale/Astarion in the images shown above, and their skulls should be noticeably smaller than the medium-sized human model. I couldn't agree more with that point. Really just a 1:2, as if a human had "Reduce" cast on them to go down 1 size. They would look so much cooler that way!
Dwarves should stand a head taller than halflings so they are easy to distinguish. The Dwarves I imagine at about the height of Human's shoulders say, with the larger sized skulls relative to the human model. Basically what we see on display now.
The Halfling's head would only come up to about a Human's elbows at the tallest, and with a smaller Halfling sized skull. That way you could leave room for Gnomes to be even smaller, say at about a Human's waste height or lower? I think Gnomes could follow the Dwarven proportionality and relatively larger skull-size at 1:2, the same way Halflings would follow Humans/Half-Elf models at about 1:2.
To me that would look good and be easy to parse visually, even from a distance.
ps. sorry this shop is rough, but to give a visual of what a Halfling might look like at that scale standing next to a Human/Half-Elf.... This is actually 66% scale, which is more at the elbow height of a Human. I think it works well for the quick read.
I think that approach would probably make Halflings very popular as a PC choice. I'd like to see Nettie or Aaron as halflings with those proportions, I think it would make them look like Halflings more than beardless Dwarves. I thought Nettie was for sure Dwarven, but it's just hard to tell, and the player goes off what's available to them at Char creation.
Perhaps an even better way to go, and which would probably be appropriate for the times, is to provide a with-dwarfism/gigantism phenotype in the regular Human models as an option at either extreme of the size spectrum.
Like Nettie and Aaron could just be Humans with Achondroplasia, which is what they already appear to be anyway. You know rather than trying to make them Halflings or Gnomes or Dwarves with a V. I mean just put a Willow option in there, and a Fezzik too while they're at it, as Human options though. With more phenotypes that would be a cool add. It's only slightly fucked up that D&D doesn't take a similar formal attitude towards that stuff as they do towards say racial diversity for Humans. They could easily shore that up to be a bit more inclusive, without really giving anything up in the process.
pps. how would you feel about all the current Halfling models just becoming Gnome models?
I mean as Gnomes they kinda work for me, and we've already got the Deep Gnome who gets windmill'd using this model-type/proportionality. That way they could keep all the current NPCs unchanged if they want, just switched the Race field for them. Return to the Halflings and do em up right! Basically looking more like Humans/Half-Elves at 1:2 or thereabouts. They really need to have smaller heads.