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It's my first post here. Hello all!
At any rate, a couple of my friends and I stumbled on the 8th ed WHFB codex and are in the process of trying it out with 500-point lists before moving on to lengthier battles and more complicated lists. My Dwarf list is below:

Lords - 0

Heroes - 75 points

Master Engineer with Rune of Stone

Core- 125 Points

10 Quarrelers with shields and a musician

Special - 180 points

1 Cannon with Engineer and Runes of Defence and Forging

Rare- 120 points

1 Organ Gun

The plan is to have the Master Engineer Entrench the organ gun and then join up with the cannon, at which point the organ gun shoots the little things and the cannon shoots the big things while the Quarrelers provide both mobility preferable to the Cannon and at least a measure of close combat ability.

So what's wrong with it? Ought I to find a way to add a Rune of Penetration to the Cannon? Do I need a Runesmith and Rune of Balance (paid for by removing the cannon) to improve my antimagical capabilities? Perhaps I'd be better served with a unit of Ironbreakers in place of the Cannon? Any advice as to how to make a small Dwarf army in general would be wonderful (I like shooty armies, but i don't know how feasible they are).

The organgun is great.
Cannon might be a bit much for a 500 point game.
if you do want to give it a rune, make it rune of forging.

10 quarrelers are good, 30" range.

But you have no troops that can take a punch, you might want to exchange the cannon for some warriors and exchange your master engineer for a thane.

dwarfs have a natural +2 dispell without a runesmith, in low point games i wouldn't worry about magic to much.

If you do want a gunline.

10 quarreler +shields = 120
10 thunderer + shields = 150
organgun = 120
master engineer with goodies = 70+

If I'm replacing the cannon, would it be better to go with its points cost in Warriors or Ironbreakers?

Basically, 18 warriors with shields, a musician and a standard bearer
or
7 Ironbreakers with musician, standard bearer (runic standard, Battle and Stoicism) and Ironbeard?

I like the gun line very much. Is the Master Engineer worth it for Entrenchment alone?

How would you kit out a Thane for an army this small?

Thanks!

7 iron breakers look and act really cool on the table, but 18 warriors can take a lot more punishment at 5 points p/m less. It gives you a bigger buffer unit

Master engineer - entrenchment is nice. It gives you that hard cover and negates any charge bonus when you do get attacked. But your still vurnerable against template weapons

If you want a thane, MR of gromril (1+Sv) and MR of swiftness (ASF)

I see. I suppose then it depends on the particular fashion in which the cannon is overkill; I'm torn between replacing the quarrelers with warriors or the cannon with warriors (and the master engineer with a remarkably durable thane).

How is the cannon too much?

Cannons are usually used to take down larger beasties. At 500pts you wont find many large beasties that the Organ Gun can take down. Once you get to 1000pts I say take both but for 500 the organ gun does enough!

That makes sense; the cannon is out, then.

As to ranged troops, are Thunderers or Quarrelers preferable? I don't know enough about other lists to know if Armor Piercing is going to make the reduced range and increased unit cost worth it, as attractive as +1 to hit is.

Welll now its up to your own playstyle. If you rather have a bit more range than a +1 to hit, then you should use quarrellers (which are very cheap so you can use spare points to other things) If you like the +1 to hit more then use thunderers Personally i like thunderers more because their +1 to hit gives you more shots that will eventually hit. Quarrellers are good, but their bigger range will probably (when going for a gunline that will barely move) only come in handy the 1st turn, while +1 to hit will be usefull all of your turns (maybe not the 1st one if you are 1st to play). But in the end, it is your army list and you should decide what to use.