so how should they handle Snow White?

It seems like part of the issue is that these roles tend to be stereotyped and under written. I haven’t seen the film but each dwarf should have been fully fleshed out and every actor given a chance to shine. They should have eliminated as many stereotypes as possible, maybe even call the film just “Snow White” and have the dwarfs clarify they prefer being called little people. They could have consulted the community and had some of them do sensitivity checks on the script (Warick Davis would have been perfect for this as he has a little people charity and extensive acting experience).

They don't live in a cave, they're miners, they work in a cave. What's wrong with that? In mining it's an advantage to be small, that's why they made children do it before child labour laws (and because it's cheaper), so it wouldn't be so strange to imagine small people ending up in that line of work and bonding together in this medieval type of society in which this story plays. What exactly is the issue here? It's not bad to have people with dwarfism in a story right?

Just deepen the characters a little so they're not just comic relief and it can be a great inclusive story.

Thought this was a reference to a GOT sequel about John’s Snow and the white haired princess kid.