It does sound like a useful cultural pressure valve. No need for anyone to blame themselves or each other after the battle almost went so badly, it's the mountain's fault for intruding on their battle. And there might be genuine strategic benefits to it if the battle took place close to their Hold and there was a reasonable chance of having to fight there again in the future, removing unsure ground and replacing it with nice clear firing lines.
But when the story gets retold amongst manlings, the nuance is stripped away and it becomes the tale of those ridiculous Dwarves who declared a Grudge against a mountain.
Yep! Productivity and venting both. And Dwarfs that have a task to do and focus on and which might need heavy labor too, are going to be kept busy rather than brooding and raging over a horrible loss.
Feeling useful and like you're doing something, and being kept busy with hard mining work, could be an outlet and distraction from anger and depression.
Frankly, to a degree, the hard-to-believe part of that story was ten
thousand Dwarfs dying all at once and all of a sudden. To
one spellcaster blowing up. I mean, it could happen, but...
Hmm, maybe the Dwarfs felt like that too. '
How many died?! Just like that?!' 'There's got to be something wrong here. How do you even have that many people die to that, like that.' 'Maybe somebody was careless in where they led a throng, fighting in an area with structural issues such that it was practically tempting fate. Because god knows how else something this absurd can happen.' And you can see why they'd want to immediately orient to blaming the mountain instead. Because blaming yourself for being the one to maneuver army into a deathtrap-if-an-explosion-happens seems likely. Or even just... Even if
not blaming yourself, then feeling
responsible for it.
If memory serves, Dwarfs were under attack from a Goblin Shaman, and then he did as they often do, which is blow up. Him blowing up caused a cave-in that killed some 10,000 Dwarfs. The Shaman was dead by his own hand, so the only target left to try to have some measure of restitution was the mountain itself.
With a Grudge, it's not enough that the target dies, Dwarfs have to play some sort of role, even indirectly, for it to have the right weight. That's my understanding, at least.
Was it a rockslide in a canyon, or a cave-in in a cave? I vaguely remember it being the former (which further led to my shocked/disbelieving reaction when I first read that story being 'A rockslide kills that many people?' 'The miscast explosion is bad enough, and in exactly the right spot enough, that it causes that big a rockslide?' 'There were that many Dwarfs to begin with? Really? And all in the exact spot to be killed be one rockslide?' '... Well I mean, it can happen. It's not impossible. And tragedies, outliers, and significant events
do happen, after all.' 'But still. Geeze. What a story.'), but the latter -- a cave-in -- would also make sense.
I suppose notable or exciting or absurd or interesting or unusual or improbable events
are the sort of thing you'd like to show off and trot out in your book and armybook fluff text, after all.