Katharine Kerr - The Shadow Isle (The Silver Wyrm, Book 4)

The Horsekin are assembling along Prince Dar's northern border, and the Deverry alliance simply does not have the men and resources to prevent their enemies from moving into the wilderness areas known as the Ghostlands. But suddenly, the Dwrgi folk and the dragons come to Dar's aid, tipping the balance in their favor and offering Dar's people a chance to defeat the Horsekin once and for all.