You can create 4 seperate towns (so 4 elf towns if you like). They aren't connected in anyway but they let you play the game differently with 4 cities to build. The dwarven unit is just like a merc unit, you hire/get them but they are just added to your troops of whatever race your town is (you can have different race towns).
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When I'm not in my right mind my left gets kind of crowded.
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