ADDED from the link:
Tolkien himself admitted that “dwarves” was a misspelling. In a letter to Stanley Unwin, the publisher of The Hobbit, he wrote:
"No reviewer (that I have seen), although all have carefully used the correct dwarfs themselves, has commented on the fact (which I only became conscious of through reviews) that I use throughout the ‘incorrect’ plural dwarves. I am afraid it is just a piece of private bad grammar, rather shocking in a philologist; but I shall have to go on with it."