So I'm designing a game all about dwarves and I had a few ideas for mechanics. I'd like to run these by you and ask some questions.

A dwarf's life is a series of ordeals. The dwarf risks life and limb during each ordeal for glory and fortune.
Dwarves will usually end up taking wounds during ordeals.
Wounds almost often impose a penalty on one of the dwarf's ability scores (beard, gut, hat, etc.) until healed.
Sometimes when a wound is healed, it leaves a scar.
Dwarves consider scars to be badges of honor, thus some scars will actually award ability bonuses. This a primary means of character advancement.

The problem with ability drain is that it often results in a 'death spiral' where a PC that is already losing just continues to lose.
One way to avoid this is through alcohol.
When dwarves drink alcohol, they gain a number of 'drunk points'.
A dwarf with enough drunk points is able to ignore penalties imposed by wounds. However, too many drunk points can also cause dwarves to ignore bonuses.

Questions:

Are drunk points sufficient to mitigate the 'death spiral' problem?
Does the scar mechanic make it too easy to gain ability bonuses?
Your dwarf's gut ability determines maximum drunk points. Drunk points allow you to ignore penalties to ability scores. I'm not entirely sure what should happen when a dwarf takes gut wounds. Any thoughts?
Does this stuff sound dwarfy enough?

Maybe instead of a death spiral, have the characters functional at a base level, then through preparation, equipment and feats of dwarfishness, they gain a series of bonuses.

When stacked up with these bonuses, Dwarves are fearless warriors and they can confront the greatest of foes...but doing so has the chance of eroding away some of the bonuses.

Thus a dwarf's life is all about claiming these bonuses (short term effects that might last a scene or even a game), then using them to the best advantage.

Characters facing off against one another whittle away each other's bonuses, then tactfully withdraw once they are back at normal level.

Character's facing off against monsters don't have this gentlmanly aspect in their combats, they need to seriously consider whether to retreat (a very undwarfish notion), or stand their ground (and potentially die with the next incoming strike).

Alcohol might give a series of illusiory bonuses...the character thinks they are tougher than they really are. But I haven't considered how this effect might be implemented under this play style.

All your questions seem to rely on a more direct mechanics than on the themes given. Do scars give too much of a bonus? Do drunk points offset the death spiral? These are really numbers questions... what are the numbers involved.

I'm of the opinion that if ability drain is only applied to one of several abilities, it just forces the character to make the other abilities pick up the slack.  Make sure that there are plenty of options available for different abilities and death spiral shouldn't be a problem.

I still like the idea of relatively few stats and of those stats I do like the idea of a beard stat.

How do you pick beard wounds working, or being?

The nearest thing that comes to my mind is braided beards and that moves more in the direction of insignia, although  the idea of insignia denoting the experience of the dwarf does kind of appeal. 

flossy wrote:
I still like the idea of relatively few stats and of those stats I do like the idea of a beard stat.

How do you pick beard wounds working, or being?

This is more from an in-fiction perspective, but... if it's such a shameful thing to lose one's beard, what happens to a dwarf who's waiting for it to regrow?
For that matter, getting it cut, and then regrowing it... does that make it come back cooler? With sweet braids and all gnarly and stuff?
Also:

chronoplasm said,
They are hard to heal, do leave scars, but also leave disfigurements. A disfigurement imposes a -1 penalty to a single ability score.