Even though it is obvious you are intentionally misreading the article to try to find something to offend your feigned sensibilities, for some reason I respond.
He is comparing north and south Koreans. Genetically basically the same people. Nevertheless the Northerners are 6 inches shorter due to lifelong malnutrition.
I don't think most people realize that the North Korean regime is nearly as bad as the Nazi and Soviet Stalinist regimes. The only difference is that the impact of that regime has been comparatively limited outside of the country. Which in many ways is very sad for the unfortunates trapped inside, since it seems to mean that the world pays very much less attention to their plight.
To call a group of our fellow humans "a sort of new species" - as the author does - is offensive, no matter who the target. That legitimately offends my sensibilities, as I consider myself to fall under the same umbrella as North Koreans - that of humanity at large. As you stated yourself, these people are physically different from others due to a lifetime of malnutrition, NOT a genetic evolution, which would be necessary for a new species to emerge. Also, using the term "dwarf", which is a colloquial term for a medical disorder, is simply inaccurate, and hints at the superiority bias of this author. The rest of the piece follows a similar tone, and to me does no good in bringing us to a more civil position with North Korea.
I think one of Hitchens' points is that there may be no good to be done with a civil position toward North Korea. In discussing the book, The Cleanest Race, he says the conclusions of the book could "mean that peace and disarmament negotiations with [N. Korea] are a waste of time—and perhaps a dangerous waste at that."
You appear to be either a troll or someone who gets off on feeling offended.
Nonetheless, to clarify the title for you:
a) The author cites several examples of pervasive racism in NK society (this is where the racist part comes from).
b) The author indicates that North Korean citizens are six inches shorter than their genetically identical South Korean counterparts. (This is where the dwarves part comes from).
Hence 'A Nation of Racist Dwarves' is merely a statement of fact.
To be fair, so is Hitchens, in a sense. The difference is, Hitchens just does is so much more eloquently than you, and has a good point hidden behind all the invective. You're just giving voice to a cliche.