1. The dwarf is female, but hides her gender from humans, because of EVERYBODY assumes that dwarf blacksmiths are male, and she can charge better prices that way ... but she is not happy being a blacksmith, or a warrior, and wants to be a bard instead;
2. My (female) protagonist comes into town, and encourages my dwarf that she can be anything she wants to be. My dwarf is shy about that - sing in public? People will laugh! But, thanks to my protag's encouragement, the dwarf promises to think about it -- and ...
3. My dwarf plucks up her courage and shaves her beard off.
Oh, and one more thing: my dwarf is very proud of her facial hair, and uses her smithing experience to create a pair of tweezers and grooming scissors, and her (limited) knowledge of herbals to create shampoo from animal fats and plant/herbal infusions. (This is what the Vikings did for their facial hair).
What do you think about this? Can a dwarf be a dwarf even if he/she has a shave?