Oh, it doesn't bother me either way, and I'm not trying to favor one side over the other, it's just an interesting question that I'd like to explore, especially as the issue doesn't seem to have come up before. So I'm simply fishing for opinions.
When you have a culture that values history as much as dwarves with a rich oral tradition you can go a lot deeper.
Do we
know that their rich traditions were
oral? Maybe they are, but we can't assume so.
I'm not entirely sure we can rule out things like quipu, or hollow clay balls filled with tokens, from technically being "writing". Going by the most basic urRu definition, "words that stay", they seem to qualify.
This is a picture of the surrender of English general Burgoyne to the continental army. The only person who needs to know this is the artist, if you've never heard of Burgoyne or even the revolutionary war and you can't make heads or tails of it that doesn't change what it is.
That's a good point. Although, to fit the timeframe of most DF engravings, a more apt analogy would be of an artist
today, making an artwork of something that happened long before he was born. Such an artist, literate or not, would have to base his renderings on
other likenesses drawn (ideally) from life--whether these renderings were handed down to the artist with oral cues ("This is General Burgoyne/Washington/Lafeyette"), or merely with their names
written beside them, is still up in the air for dwarves.
Let's consider a similar engraving in your fort's main dining hall.
A) The majority of dwarves can read. The generals and other major figures have their names carved below them, so that everyone can see that it is Washington striking a triumphant pose, and Burgoyne making a plaintive gesture. Such an artwork would most likely continue on long after the death of the artist, and I think we're all agreed on how much dwarves love THAT.
B) The majority of dwarves
cannot read. The artist would have to personally explain his creation, pointing out the key players, the symbolism of their placement within the scene, and illustrating how this went on to affect the history of the Unity of States. He would probably do this several times over the course of years, handing down knowledge of the event not just to those who would eventually follow in his footsteps, but to all dwarves in general. And THAT sounds really dwarfy, too.