I can't think of a single D&D game I've been in in the past seven or so years since it's been one of the games I've routinely played that has allowed gnomes. As a GM, I routinely disallow anyone to play short people races because they inevitably try to do it as comic relief - and do it poorly, hehe.
And you hit the nail on the head. The reason they were included in the first place is because there was an unused fantasy critter name laying around. I think it's obvious that the 1st ed AD&D guys weren't really thinking about "ecological niches" or even, really, "party niches" when they made the game - but once they were in, they were tradition and they got made into every edition since then . . . with the exception of 4th, which has dispensed with them (save as unimportant monsters, lumped together with goblins, kobolds and the rest of the critters 1st level characters fight).
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And you hit the nail on the head. The reason they were included in the first place is because there was an unused fantasy critter name laying around. I think it's obvious that the 1st ed AD&D guys weren't really thinking about "ecological niches" or even, really, "party niches" when they made the game - but once they were in, they were tradition and they got made into every edition since then . . . with the exception of 4th, which has dispensed with them (save as unimportant monsters, lumped together with goblins, kobolds and the rest of the critters 1st level characters fight).