Some interesting discussion in yesterday's Open Friday comments. It's only fair that I offer my own thoughts and clarifications.
First, the question I asked was purely theoretical. It's not something that's come up in my campaign and likely won't. So, any assumption that I was asking for advice about how to handle the situation in the Dwimmermount game is mistaken.
Second, the question concerned the player of a dwarf character who wanted his character's son to be a gnome, not a player who wished to play a gnome PC. If a player in my campaign wanted to be a gnome, I'd let him without question, provided there wasn't already a gnome PC in the game, as I have a pretty firm rule that there can never be more than one member of a non-human races as a PC in the campaign at any given time.
My own feeling is that effects/outcomes that the rules imply are rare ought to remain so, even if it'd be "cool," "fun," or otherwise interesting to fudge rolls to bring them about. This is a longstanding opinion of mine, as the story of Morgan Just makes clear. I rarely fudge dice rolls for hits or damage. The same applies to rolls for magic items (which is why, for example, there are two rings of invisibility kicking around my campaign right now but very few magic weapons). When a wand of wonder or a deck of many things enters play, I don't cook the books in order to ensure a result a player or I think is the most interesting, because, I have learned over the years that my own instincts or those of my players aren't any more reliably apt to produce "fun" than are random rolls.
In the case of a gnome son, I'd let the dice fall where they may. I wrote the rules specifically to make the appearance of gnomes comparatively rare and, therefore, special, much in the same way that a 3D6 roll makes having a Strength or Intelligence of 17 or 18 rare and special. That's also why there aren't any swords +3 or rings of wishes in my campaign at present either -- the rules intend for them to be rare, regardless of whether or not including them would something that my players or I would like.
Now, obviously, like all rules, I occasionally do make exceptions or bend things this way or that for one reason or another, but that's not my usual habit and it's a practice I generally avoid. I really do think trusting the dice is no less likely to lead to a bad session than is arranging things so that they turn out "as they should." My players and I already plan enough aspects of the campaign as it is; why avoid the use of random rolls when the rules call for them, especially when those rolls can lead to something surprising?
So, word of warning: if you're in a game refereed by me and you want something for your character that the rules make rare, you're getting no special consideration beyond what the Lady grants you through your throws of the dice. Other referees will have their own approaches and that's fine, but this is how I handle things these days.