From what I've read; Goblins = Orcs and the naming is used interchangably (although the term "goblins" was only used in reference to the orcs in "the hobbit").
Dwarves would not use tunneling as a weapon like that, they typically just went into battle like men (although never on horseback). Their main strength would be in their high hitpoints and resistance to flame (due to the heavy armor, even dragon flames can't harm them much).
You hinted at the drawback for the elves as being low build times...you can probably limit their armies more with the population cap somehow. Both the elves and the dwarves should take a while to build units, and thus they'd focus more on quality over quantitiy.
Don't go adding the "army of the south", instead just give a few new units to the FOD...possibly dragons (those would be very cool).
My overall suggestion would be for you to just add the elves and the dwarves as separate sides and just give a few new units to the FOD.
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