Like the Halflings, for me the Gnomes have a similar problem. There was nothing that makes them stand out from being forest dwarves that are good at illusions. While I did not want Kenders for my halflings I respected the creativity that went into them. Not so for the Tinker Gnomes which I thought were lame from day 1. That I have to endure that concept every time I play World of Warcraft only adds fuel to the fire.
Fortunately I ran into another author who really made Gnomes stand out and not be tinkers. Elisabeth Moon in her excellent Paksenarrion and Legacy of Gird books. Basically Gnomes are Lawful with a capital L. That their defining characteristic is their absolute belief in the rule of law and the concept of fair exchange.
However interesting, I didn't want to just outright copy her Gnomes for the Majestic Wilderlands. Besides she doesn't explain the skilled at Illusion part of Gnomes. This is what I came up with.
The Gnomes were created alongside the Dwarves and were bred to work in the forests felling trees and gathering special plants. They share many of the same traits as the Dwarves. Their stubbornness manifests as a hatred of injustice. After the wars they returned to the forests and settle alongside the elves. They are noted for their ability to mediate disputes and their insistence on fair dealing. Unlike the Dwarves during the wars they developed a keen wit and are also known as notorious pranksters.
• Gnomes are long lived and have triple the lifespan of Man.
• Gnomes are +1 to Constitution, +1 to Wisdom, -1 to Charisma.
• Gnomes are gain +4 saving throw vs poison.
• Gnomes gain +2 to any Athletic task.
Gnomes are similar to Dwarves but do not share their low birth rates or the imbalance between male and females. As a consequence their culture is not as obsessed with defending their families and survival. They share the stubbornness of the dwarves and this has manifested as hatred of injustice.
Their hatred of injustice has a darker manifestation. When fighting another race or culture they will wage Total War against their enemies. Their armies will practice scorched earth tactics on both offense and defense. They will send handpicked troops behind enemy lines to strike any target supporting the enemy including non-combatants. Many gnome magic-users are skilled at illusions to support these attacks.
They help the Halflings in their efforts to keep the peace between the races. The Gnomes are noted for their ability as mediators and are often called to adjudicate disputes between the races. They are noted for their keen wits and are notorious pranksters. Like Dwarves, Gnomes have clans that they hold an allegiance too. Their clan gatherings are known for their bawdy entertainment which stands in stark contrast to their ruthlessness in war.