[Potatothan]

I would have to agree with legolas here. Gimli and éowin are talking right before Gimli falls of his horse. It goes something like this:

Gimli: Yes it's true that you don't see many dwarf women. But they are so alike in voice and appearing that they are oftenly mistaken for dwarf man.That made it a legend that there are no dwarfwomen, and that dwarfs just jump out of holes in the ground. Which is ofcourse ridiculous.

And when Gimli said that they are often mistaken for dwarf men, Aragorn makes a beard with his hands saying: It's the beards which makes Eowyn smile. So the beard thing is just a joke. I guess dwarves reproduce just like the humans, elves and hobbits. Well, and the ents and oh, I could go on, you get my point.

~Potatothan