I love the idea of kobolds cozying up to more powerful civilizations. I think they should at best fit the role of troublesome allies though, seeing as how I doubt a kobold would really be able to contain their kleptomania for the sake of their allies, and if they took the field with an allied army and there was even a slight chance of failure, they'd probably just scatter, leaving their allies in the dust.
I think that all civilizations though should have at least a chance to get powerful, so that way it is possible to generate a world dominated by kobolds, goblins, humans, and the like, and such worlds would be very different as far as political landscape goes. In this sense, I think kobolds should have some natural advantages. For instance, because of their trapping ability, they should be very difficult to assault. Also, unlike dwarves, kobolds live in pretty large caves, so they are less invasive diggers than the dwarves are, so perhaps they should have friendlier relations with cave and subterranean type creatures (As they have nothing of value to steal, the kobolds have no reason to piss them off), and should be able to sometimes form loose alliances with them.
It might be interesting to see what a kobold dominated world might look like. It'd probably be fairly primitive, brutish, and anarchic (As opposed to a goblin dominated world, which might be heavily based on slavery, brainwashing, and oppression by goblins and their allies), and perhaps even the more primitive subterranean races would freely walk the surface, hunting humans and the like.