Well, you readily accepted the possibility of introducing a new unit, so I wouldn't dismiss the Dwarves as a potential "4th Faction" so categorically. It's as if Dragons couldn't be replaced.

In principle, yes, Dwarves are also among the candidates for the 4th race. Dragons can be replaced, but I would prefer something like in Heroes 1, where there's only one Dragon in the castles, or at least rename the Dragon, as they did with the Angels. After all, the Dwarves' units, at least, introduce some variety.

although I don't even know which is worse: the Dwarven faction from Heroes 5 or the Orcs, who, logically and according to the plot, simply couldn't exist (if I remember the year of their creation correctly, although it would still be stupid, since there are no Mages).
And yes, for originality, they could have made the main faction not Humans, but Mages, for example. They created the Orcs, and the Necromancers originated from them. There are already two enemies, and if you add Demons, it would be even cooler.

According to the plot, the Orcs have only recently escaped from the Mages and are still licking their wounds, while the Elves should be separating from Sylvan at this time.
Still, the Dwarves from Heroes 5 are worse; such masterful copying of units, I haven't seen anywhere else, as if the Dwarves couldn't find anyone other than Dragons (Bears don't count).
It would have been better to have 6 factions in the original instead of 5: Haven, Mages, Inferno, Orcs, Necromancers, Nagas - you could replace the Mages or Orcs with Dwarves or Elves (any of them).
That would be: 2 good, 2 evil, 2 neutral (if you consider Orcs and Nagas as such)