As Witch King said - we might go directly for DoF2. But during the DoF2 development time we do expect to keep on adding content online, and chances of an expansion pack with new races (distributed online) are very real.
Our Dwarfs will be quite unique - in a way that they would live underground. Our engine is capable of rendering underground passages on the same map. Heh - I guess this is hard to explain without a couple of screenshots, but overall I agree - there is only that far we can take Dwarfs aside from adding whole bunch of Tanks and Flight ships as they did in Saga.
With the undead - I disagree, the possibilities are endless, we toyed around with the race which gets units form killing all living creatures, and have access to the skeleton version of all other racial units. Besides - undead race can be tons of fun style wise - not sure if any of you guys seen the old classic - Army of Darkness. If Undead are to be included in our expansion pack this the kind you can expect - completely original gameplay, and lots of dark humor.