"The tale of his dealings with the Petty Dwarves who still lingered there, remnant of a once more numerous folk, is told elsewhere. But during the years of peace that still remained Finrod carried out his design, and established the great mansions that were later called Nargothrond (< Narog +ost-rond), the cavernous halls beside the Narog. In this labour he had at first help from the Petty Dwarves and their feigned friendship; for which he rewarded them generously until Mîm their chieftain made an attempt to murder him in his sleep and was driven out into the wild." -Nature of Middle Earth, "The Founding of Nargothrond."
So with the Nature of Middle-Earth, we got to see more of Tolkien's thoughts on the petty dwarves, and uhh... they are quite troubling.
The narrative for the establishment of Nargothrond usually goes like this: Finrod employs the Petty-Dwarves, who lived on the land previously, to help build Nargothrond. Petty-Dwarves pretend to be friends with Finrod and initially help him, then they try to assassinate him but fail. They are kicked out. And while Tolkien pretty clearly shows his bias here towards Finrod in this chapter, what isn't mentioned is how tragic this whole situation was for Finrod and the Petty Dwarves once one takes a closer look at it.
For those who do not know, the petty dwarves were exiles from other Dwarf kingdoms. Now quite a few committed crimes, yes, but quite a few were exiled for laziness, and perhaps, even more tragic, what they looked like. We can assume that quite a few dwarf-women were exiles as well. Enough to have an increase in population over time? Tolkien does not provide enough information about that. But we do know that Mîm had offspring, after all. They were once quite numerous and settled in Beleriand before the elves.
And then first contact happened between the Sindar and dwarves... and it was not pretty. It's said that the petty-dwarves attacked first. The elves thought of the petty-dwarves as animals and then hunted them like animals... And most likely amongst the many dwarves the Sindar hunted down were the dwarf-women, as the population of the petty-dwarves dwindled by the time Finrod appeared in Beleriand. Now the other dwarves called a stop to this and the murder of the petty-dwarves stopped, but the damage was done, they could no longer sustain a high population. And even more tragically... Finrod would unknowingly be the cause of them losing one of their homes.
One of the big things left out of this tale that is inconsistent with tales like Lord of the Rings are the themes of Pity and Empathy. Tolkien gives no pity nor empathy in "The Founding of Nargothrond" chapter to the Petty-Dwarves, who had to work for the very people who resembled the mass murderers of their kin, who were supposed to, at best, share their home or, at worst, give away their home to people who strongly resembled the mass murderers of their kin. There was a generous reward that was referred to.
... No reward is worth losing one's sense of home. Since this was the construction of Nargothrond, the logical assumption is that the petty-dwarves would have to lose at least part of theirs to Finrod's folk.
So quite frankly, is there surprise at all that the Petty-Dwarves absolutely despised the elves and would try to kill Finrod, who is an elf-leader that probably was going to be a constant living reminder of one of the darkest events in dwarf history by his presence alone (Finrod is innocent of all this, btw, but are none of his followers Sindar that knew of someone who killed a petty-dwarf?)? Finrod wasn't representing just himself here, he was representing a group of elves, which probably made it easier for Mîm to justify the assassination attempt.
Were there alternative places that Finrod could've went that would've been a stronghold against Morgoth? How aware was he of the mass-murder of the petty dwarves? What were his dealings with the Petty Dwarves that Tolkien referred to?
That last question is probably the most tragic of them all. We simply do not know what discussions Finrod had, if he was convinced that all was forgiven, or if the friendship was at any point genuine. But I highly doubt the latter once Finrod pointed out multiple people were coming in to live in the location.
What are your thoughts on this dark incident in Middle-Earth history? Was there a way to save the Petty-Dwarves, or was the damage already done at this point? Were the Petty-Dwarves doomed to begin with even without the disastrous First Contact event with the elves?