I had the same impression, but that was the point of the film.
I think people generally perceive dwarfs as sweet, cute, joyful, child-like, mischievous beings, and Herzog deconstructed that myth by presenting us with an alteriour reality that people know exists but rarely think about or discuss.
And dwarfs are a metonymy for the mythologized ideas people possess about certain issues, ideas that people refuse to critically analyze or discuss or probe in depth because the truths inherent in the analysis challenge, and perhaps shatter, our carefully constructed belief systems.
The people in the film are supposed to be cruel and annoying, they're supposed to anger us, and we're supposed to think about why that negative depiction unsettles us. It's in exercise in deconstructing why we feel what we feel and why we believe what we believe and why we react the way we react.
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