It is quite possible to have a world with no surviving Dwarf civ. I specificly set about making one for my survivors fort.
I'm not into all this 'modding' stuff everyone seems to do heh, so I just made medium size maps with the number of civs set to 4 (one each for elf, human, goblin and dwarf). If you get lucky and have the dwarves and goblins (or sometimes elves) spawn right next to each other, they will almost certainly war and one will be wiped out. Most of the time the elves/goblins though, so it takes quite a few attempts to get the dwarves to lose. Just keep pausing the generation and refocusing the map on the dwarven mountain halls and watch to see if it changes to the ruin symbol (mu). Also more often than not the elves and human end up fighting too, so if you want all the other races remaining, you tend to have to stop the world gen early before the humans wipe out the elves entirely or sometimes vice versa.
So with a destroyed civ, you can still embark and you will never get migrants or dwarven caravans. It seems likely that it also messes up the arival of nobles too though (which may be considered a good thing heh). My population has only just passed 50, but theres certainly no sign of a Dungeon Master. I've been growing my population by managing the child cap, which helpfully isn't dependant on the pop cap. I then realised maybe I should have done a tiny bit of modding, since waiting 12 years with just 7 able dwarves for children to grow up is not all that fun heh.