I like the idea of Steam Punk, but if it
is implemented in Dwarf Fortress, it should definately be of the mild sort: As in, you may see a steam powered gate (Or trap system), but the high-tech things such as robots and coffee machines would be either impossibly rare and difficult to create or non-existant.
Dwarves favor functionality before anything else, in my mind: They'd go for the idea of the steam-driven gate without a second thought (No sane dwarf would want to open and close that monster!), but anything a robot could do, a dwarf could do, so it would be considered a waste of effort. And dwarves don't drink coffee, they drink beer!
I would like to disagree with the comment that dwarves wouldn't sit around and smoke a pipe, though: The general populace is very work driven, and breaks are considered to be nothing more than a few minutes of breathing before you worked again, but I'm sure that, in a more calm setting where nobles wouldn't interfere and elephants weren't threatening to stomp down the front door, dwarves would be very, very similar to hobbits in most respects.
(In fact, in LotR, dwarves were very similar to Hobbits, if more driven to treasure, warfare, and exploration - Though LotR is hardly Dwarf Fortress.)
[/running around babbling]
So, a touch of steam punk essence could be a good thing, but a full fledged steam punk era would turn the game into building enough robots to take over the world, rather than focusing on the dwarves. But that's just me.
[ October 18, 2007: Message edited by: Dreamer ]