But they seem to dig into already-elevated terrain to make their temporary homes, not an entire civilization of dwarves who live exclusively underground. Besides, the digging dwarves in S5 are vastly different from their "normal" ilk, whom we've seen in S1. (and seem to already have steam technology as well as steel structures)
Still, an underground civilization would great to see. Perhaps an offshoot of the Sindar or a completely different race (Moles?)
Air is completely possible if the Sindar reached that point. Since they constantly require change, you can't get more mobile than a mobile city. Getting to said city would be a pain without having Wingers and Dragons being a driving factor, though.
Underwater would be somewhat... interesting, though not a setting to a complete game. We've already seen the True Water Rune, so I doubt there would be any True Runes that would have much of an effect on that type of world.
Space is probably out of the question.
Formerly known as: Gothann