It appears to be nothing more than an Urban Legend and may have been started as one theory goes by miners them selves who worked that thin coal seem on their sides if it even existed in that area as the Pittsburgh seam a much thicker seam that was worked in the area .
Supposedly there where small houses with small yard's etc to boot.
I know as a child there was a couple places where people had built miniature play houses for their kids around the bridgeville area and there where some pretty elaborate gardens etc with miniature houses in them but an actual village of living small people Not that I have been able to find.
There is a reference to Blue Myst road in North Park and groups of little people attacking cars
Again nothing to it.Urban Legend
There is also mention of Pittsburgh again in the below article about a small village of houses but they where several of these around the area one on Pa 51 in Jefferson where small sample homes where built I believe by Columbus Builders.
Which again people may have construed into a village of small people especially if you where a young child passing them.
The Midget Village theme seems to pop up not only around Pittsburgh but Philadelphia as well as many other areas around the tri-state area.and across the country for that matter.
Now what people may have been referring to near Bridgeville is Mayview State Hospital where mental midgets was used as a derogatory term for patients there.
and it got convoluted into a tale of a real live village of midgets again just a theory .
Its amazing how stories get started and spread and there are plenty of them around Pittsburgh which are just that stories and nothing more this appears to be one of them.