Very good brainstorming, folks! It all gives me constant Khuralski (T9A brainstorming proposal) déjà vu!
Some quick thoughts: Kraka Drak was always meant to be a hold of uncorrupted Norse Dwarfs. Having the only known such hold on the map fall in some official background is just bad worldbuilding since some people will want to make a Norse Dwarf army, and have done so excellently in the past. Setting over story.
Going with ignorant Imperial mapmakers and assuming uncharted mountains and rivers (just like with the Khuralski) is sound. I think @Oxymandias ’ position is well chosen, though it could also be located further inland, north or northeastwards, if need be. But the gist of a mountain spur extending from the World’s Edge Mountains is a great one to keep.
We may also want to consider a scattering of corrupted holds and clusters of Chaos Dwarf Renegade clan settlements outside the major area, both a few in northern Norsca (not too close to Kraka Drak) and around the Chaos Wastes. The latter would be later colonies, or original/resettled sites located more shallowly closer to the surface, and thus moved around when the landscape went in waves like a honeymoon couple’s quilt. Including old Dwarven settlements turned upside-down, outside-in, on their sides or twisted into mad spirals and other three-dimensional subterranean shapes. A core area is fine, but don’t have the Renegades be too concentrated. Disperse them some. It’s more Chaotic, in line with Dwarven colonists following ore veins and better for chance encounters out in the Chaos Wastes and Norsca.
Lovely idea with basing eight major clans on the original set of models! Top ideas for them all.
Great going, keep it up.