Well, the fact that they all worked in a Diamond Mine does argue in favor of them being mythological Dwarfs. And they all had really extreme personality traits that matched their names, which would be unlikely in real life.
I think Walt Disney never intended people to take anything in the story that literally. In the real world, there aren't any magical talking mirrors, nor can someone change their appearance at will. And there aren't any cursed apples that can make you fall into a coma after taking just one bite, where the only antidote is true love's kiss (that seems to come up a lot in Disney movies, come to think of it!)
It's a fantasy. A wonderfully illustrated one, with memorable, fantastical characters that are very sweet and adorable (aside from the witch.)
Again, I don't mind if they want to make another story reimagined from the original characters. But if, someday, we will no longer be able to enjoy the original animated classic because it offends modern sensibilities, that would be very sad, indeed.