The major elements of the dwarven kingdom/city of Grygsdraal are as follows:
1. The dwarves maintain extensive grain crops and herds of feed animals in remote mountain valleys accessible only from dwarven tunnels, but open to the air. In these valleys they raise cattle, sheep, pigs, goats, barley, hops, wheat, etc. In some cases they actually partner with humans or other races to live in the valleys as herdsmen or farmers for years at a time (think of programmers who move to Saudi Arabia for five years at a premium and then return home). This is also where they get the raw materials to brew their famous dwarven ale.
2. Underground caverns are full of fungi, and underground rivers, lakes and seas provide a bounty of blind fish and invertebrates. The giant albino shrimp of the dwarves is a renowned delicacy throughout the civilized lands, and is exported as a cash crop.
3. Deep underground are mostly secret tunnels which connect to ancient passages. Most of these are firmly locked up and guarded. They are heavily trapped and dwarven mages have set many detection and alarm spells in the tunnels. Although it is rarely spoken of, the dwarves maintain trade with Drow and other underground races. Trade includes the exchange of rare gems and metals (particularly mithril) which the dwarves never have enough of, for dwarven armor, dwarven ale and other dwarven trade goods.
4. “Dark dwarves” are not unheard of either, and in many cases they provide the liaison between dwarves and other underground races.
5. Dwarven architecture blends the darkness with the light, much as dwarves themselves represent a link between two worlds. Dwarves do not live in the dark, they love the sight of light shining on, through and reflecting off of gems and precious metals far too much. For that reason the dwarven city has many great silver-coated shafts bringing sunlight deep into the city, where it is reflected and directed into many rooms. They also use magic to create light where they want it and that is just about everywhere. The great dwarven city is no dark and gloomy place, it is a place of splendor and beauty with color everywhere. Darkvision has no color, and dwarves appreciate darkvision for its utility, but they do not live in the dark.
6. The dwarven city also has great shafts which direct fresh air through the city. They have learned that they can use the differential pressures between openings to the outside world to drive fresh air through the city without the need for mechanical or magical means. They just let nature take its course. As such the dwarven city is not stuffy and smelly.
7. Water from underground rivers and lakes is pumped through the city as well, and dwarves are among the few civilized races that have running water and active sewage processing.
8. In the event of a war or a need to shut off the city, all of these outside systems can be closed. Dwarves can manage for long periods of time in conditions that would sap the strength of humans or elves. But eventually they need air and water regardless. They mostly rely on the location of their shafts, pipes and tunnels being secret to keep water, food and air flowing through the city.