Once I have a map I generally take the attitude 'this is your world, deal with it,' and build the narrative to match it. Just as I would when writing historical fiction. If nothing else, it makes it easier to move on with the story.
One could always have an adopted human who thinks he's a dwarf, like Carrot Ironfoundersson in the Discworld novels. And Moorcock had a 'dwarf giant' (i.e. giant with dwarfism) in one of the tales.
I finally chose to ignore piracy of my books altogether and followed Cory Doctorow's example of giving away the ebooks. If nothing else, it simplified my life.
Actual 'little people' --- sprites and brownies and such -- have only shown up in my children's books and I went with the conventional choice of naming them for flowers and that sort of thing. Marjoram the sprite, Hob and Gob the brownies. Nettle and Nightshade the goblins. And so on. The elves...
My fantasy is as realistic as I can make it. That way it's more believable. And I do write what is generally considered realism too; really, it's all kind of one.
There is a mix of fauna (and flora, for that matter) in my primary fantasy cycle. Some pretty much identical to what we know here, some prehistoric holdovers (both megalodon and mosasaurs swim the seas), some that have found there way in from other worlds, such as ghalun (ghouls, which are...
I got hold of the entire Discworld series and have been working my way through them (with an occasional break to avoid Pratchett fatigue). Up to #13 so far.
Yes, it works great (at least sometimes) on the stage where a character is explaining his inner thoughts not to another character but to the audience. We can use the interior monologue for that but stories these days rarely do an omniscient peek inside the villain's head.
From my short story, Fair Games:
“There are dragon sports, I would assume.”
“To be sure. When I was young I would enjoy a bit of one-on-one air hockey. The idea is to keep the, um, puck from hitting the ground. That’s a point for the other dragon.”
“Puck?”
“Oh, we would use whatever was...