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https://www.nexusmods.com/skyrimspecialedition/mods/22499
Just to cover an additional base in the event that you are referring to miniature humans:
https://www.nexusmods.com/skyrimspecialedition/mods/4725
Of course, you could always claim that any Dwarf mod does not qualify as 'good' so that this thread will never have a conclusion (other than endless opportunities for trolling).
As for your more typical fantasy dwarf, there was a mod I saw once for oldrim that added those in, but I don't think its ever been ported to SE, and getting it to run may not be a simple matter. Honestly, new race mods just don't seem to ever get ported, or made, for SE.
Since the concept of Tolkien-style Dwarves (i.e. Gimli, short and stout with a great big bushy beard) could not exist in the Elder Scrolls universe, at least not known by that name, the NPC's comment is out of place.
Examples include Tolkien Dwarfs and Dwarfs from other games, they should still be on Nexus.
If you really have your heart set on playing a dwarf, you'll probably just need to go to oldrim. There really is no other way. And I highly doubt a dwarf mod is going to be coming any time soon given that new race mods just don't seem to be popular in SE for some reason. There's a ton of them for oldrim, but I honestly don't know of any for SE.
https://www.nexusmods.com/skyrimspecialedition/mods/4725/