There is a less mathematical but equally valid way for the dwarves to convey what they see to the next in line, which is to simply encode it in the response (alternating the pitch of the response, the pause before the response, the length of the response, etc. according to coded values for black v. white) - without saying anything but their response to the Question. This is basically just a different way than the parity solution of conveying information to the next dwarf.
While this isn't a very CS-answer, it is legal and superior to using parity since it removes the necessity for the dwarves to be able to see every dwarf before them - the existing answer becomes infeasible if the village's numbers approach normal (sizable) population levels (or the dwarves' eyesight approaches normal dwarf eyesight...). Thus the given solution can't solve without additional conditions.
One can also argue that this solution keeps the death toll close to the optimal '1', since "all dwarves in the village" includes those young, uneducated, and shortsighted (and thus less able to calculate parities for the remaining dwarves).