Man, I went away for about sixteen hours and this thread just... evolved. Okay, I'm leaving out the quotes in this response because I want to speak to a number of points that were made above.
1) I'd tend to agree that the flavor text has to refer to the most recent fall of Stoneheim, though my evidence is circumstantial. It goes like this: we know that the fall referred to here happened only hours after the fall of Myrgard. I tend to doubt that every time one city falls, the other goes with it--that they both went within hours suggests to me the blitzkrieg-type tactics that Balor employed. Secondly, the other flavor texts that make mention of Dwarven history (except the ones referring to the Smiths and the Cultists and the Mausoleum, which seem to be associated with the "old school" dwarf names) all seem to refer to recent events--the destruction of the Godhead, the new lives in the west, and so on (I'm sure there are other exceptions--let me know). Finally, the fact that the twin falls happened within hours of each other suggests a high level of communications technology--either radio or, at the very least, a series of signal fires such as the ancient Greeks used to send back news of the fall of Troy. We know that dwarven technology develops at a very rapid pace (we go from molotov cocktails to balloon bombardment to very advanced firearms and artillery in a couple of centuries, advancements that human scientists consider "awe-inspiring to behold" or whatever it says in the mortar flavor text), so I doubt the dwarves would have had such good signal technology a thousand years ago or more. Like I said, all circumstantial, but...
2) Speaking of dwarven technology... this is more of a general point, raised by the question of how much magic the dwarves use. Now, it seems to me that the dwarves are the most pragmatic and cynical of all the races. It's part of what makes them such good scientists. I can't see them eschewing a whole branch of physics (magic) on basic principles. While other races might be better at it--more in touch with the One Dream or whatever--the dwarves would certainly take advantage of whatever magic they could get their hands on. We also have some loose evidence that they used to be more heavily into it than they are now--specifically the fact that the Dwarf tags include a number of magical effects, such as a magic fireball and a magic contrail (never used, but left in for some reason). Also, the recent developments in Dwarven tech have all been science-based while the oldest marvels (the Tain, the Pathfinder Ring, this Maul of the Dwarven Kings, and so on) were much more magical. It strikes me that the Dwarves are/were perfectly comfortable with magic, however that as the years pass and their scientists learn more and more they prefer to use the predictable, repeatable technologies (our science) than the raw elemental forces (magic) and therefore are moving beyond what Humans and fir'Bolgs are capable of.
Just a thought.
3) Hey, while we're here... this possible link between the Deceiver and the Spider Cults brings me back to a very old point--my belief that Myrdred was Connacht's favorite Avatara. I can hear you groaning already, but think about it: if Myrdred was associated with the cultists that would almost certainly have to place him in Muirthemne at the right time to become one of Connacht's lieutenants and a peer of Damas, right? Right? Okay, let me know why I'm wrong.
4) Finally--one of the reasons this thread interests me so much is that I'm currently working on a new level based on, yes, dwarves. Specifically new and untested dwarf technologies (the objective is to retake a fallen dwarf research station--can you say Ghol Pathfinders?). Originally it was going to be called "The 17th Stoneheim Irregulars", thought I may have to change that now (since it appears there isn't currently a Stoneheim for them to be based out of). Anyway, I have a few questions to help with this project:
a) Were the two cities independent city-states, or was one of them a capital of the Dwarven kingdom? The flavor texts are maddeningly vague, speaking of Ephors and Archons, which would seem to suggest the former, but we also know there were Dwarven Kings, which would suggest the latter--or did the Dwarves go over to some kind of Metropolitan Republic in the roughly recent past? Similarly, how regimented are Dwarven armies? I think I can get away with a Dwarven Captain (with, of course, a white tunic), but are their Dwarven Generals? Field Marshalls? Generalissimos?
b) Part of the level is going to be looking for the wreck of the flagship of the Dwarven navy, the H.A.S (His Archon's Ship) Irascible. I won't give it away, but this is supposed to be a bit of comic relief--I mean, a Dwarven Navy? Then it occurred to me that there is, after all, a Dwarven Air Force and even, it seems, Dwarven Airborne Rangers. Is there any evidence for a naval presence?
c) Finally--and don't worry, I won't get anal over this like I did last time--how far does one imagine Dwarven tech going in the fifty years after Soulblighter bites it at Tharsis? Would people buy Dwarven Radios (specifically radio detonation of satchel charges?). How about walking, constantly-exploding robots? It's a fantasy genre and a not-so-serious map so I suppose I can get away with whatever I want, but I want to keep the level of technology relatively consistent. On a similar note--I found a repulsion field in Weirdobodomons and I seem to remember that one of the old Asylum Units used a force field. Anyone mind me using something similar in my level? I was able to figure out how such a thing works on my own, so I'm not really stealing anything, but I don't want to step on any toes.
I'm really enjoying this thread. Let's keep it going!