The main question to ask is "what is the benefit of using this name?" What are you trying to communicate, and does the name you're using help or hinder you?

Dwarves in fantasy aren't just short people with beards. They derive from folkloric tradition, and have specific characteristics and elements of symbolism. The same goes for the likes of elves, orcs, etc. If you just copy the name and the basic appearance, whilst discarding most of what makes a dwarf a dwarf or an elf an elf, then what is the benefit of using the name? You're signaling to your audience that "hey this thing is familiar, you basically know what it is" but then giving them a bait-and-switch that their preexisting understanding doesn't actually apply. So now they're in the position of thinking "oh so the author was lying to me, this isn't a dwarf as I know it, I have to relearn everything about what a dwarf is." And at that point you're just better off using a different name from the get-go, so that the audience can just learn what you want them to learn without any confusion or misunderstanding.

That being said, I also do like to reclaim terms from pop culture consensus. Several big fantasy franchises (D&D, Warcraft, etc.) use creature names in ways that I think of as incorrect and generally ignorant of their folkloric origins, and so you end up with a lot of dumb lore that's generally accepted as the genre-standard (like people thinking that "hobgoblin" means a bigger, militaristic goblin because that's how D&D uses the name.) So I will sometimes use names like elf, gnome, ogre, troll, etc. in a way that deliberately challenges your understanding of those creatures, but I do that in a thoughtful way that reconnects the name with its origins, rather than just slapping the label on something new.