Which faction poses the greatest challenge for the Dwarves?

Because their magic, like that of the Dark Elves, is primarily focused on… You can also develop Darkness magic for Demons, but they are more of a combat race, focusing on quickly summoning reinforcements and rushing. And you shouldn't try to hold positions with them; their defensive capabilities will be much weaker. Humans are more dangerous with Darkness magic… But again, their magic is also relatively low. Imagine a Necromancer with 30 magic… And their spells at the highest level are quite good: Unholy Ground, Word of Command, Plague, Dispel. Gnomes like to cluster together, so Plague is perfect for that. And with that much magic, Plague will be devastating :smile01:. And the undead will hold the defense. And then, if you have Dispel, you can disable someone with Blindness. You might not even need to use Banshee's Wail if the enemy has high initiative; they'll die on their own :smile52:.

Added 4 minutes later
And if the Gnome doesn't have a general spell dispel… then, all other things being equal, he's 100% doomed.

Added 15 minutes later
With that much magic, Dispel lasts for, I think, thirty turns. Unholy Ground lasts for 6 turns. Berserk lasts for either 6 or 8 turns, I'm not sure. Blindness lasts for 15 turns. Plague lasts for either 10 or a little less. And the damage from Plague will be around 200 HP per turn, if I'm not mistaken. You'll disable their archers, someone will be controlled, poisoned by Plague – what can the Gnome do? He might get lucky with a Rune of Energy… But he can't rely on that alone.