I felt like there's probably more to it than just "Ho ho, Dwarfs would attack a mountain if it wronged them!" Like for example, there was the "underpaid by 2 coins" story too; and in-quest it turned out to be an apocryphal or tall tale story, because there were like 5 different versions of that story. So if everybody had a variant of that story, if it's the sort of story that shows up everywhere -- that sounds like it's probably like a common cultural myth a what do you call it... folk tale or myth maybe? Dammit. Neither of those words sound quite right, but I can't think of the words or phrase that perfectly fit...
Although I suppose it could be true. That it's an example that if Dwarfs suffer tragedy or are hurt badly, then those emotions need to be addressed or worked out someway. And so in one situation, the elders decided to take out all the aggression and sorrow on the mountain, as it made for a harmless outlet that wouldn't hurt anybody.
Hm. Thinking about it, I suppose I could see something like that being done by people in general. Like for example, if a province got raided by Beastmen or Goblins out of a forest... deciding that they were utterly sick of that shit, and deciding to clear-cut the forest so it wouldn't ever happen again. Though I guess that's a bit more tactical and reasonable than "a rockslide happened; let's tear down and quarry the shit out of that mountain!"