RTF is a global modification that replaces all towns in the game.

Does the original model in the game also glitch (without re-exporting)? I haven't played in a while, but I don't remember seeing any glitches with the dwarves?

The original model is fine, but the re-exported one glitches. By the way, I've seen this bug once before – if you port the Faceless One from Heroes of Might and Magic VII, his wings will also become distorted in a similar way.