I thought it was “Eye of the beholder “

[Anzello]

Looking for a fantasy book that I read around 1999-2001. It’s was an epic fantasy novel with elves , dwarves, humans etc. I know this will be near impossible because the only sure thing I remember about book was a dwarf that the male human and elf or half elf female came across to join in their quest was that the dwarf was very afraid to look up at the sky. He said that looking up into the open space gave him great fear as he was use to living under ground in caves with a close ceiling. I know this isn’t much to go on but I do remember it being one of my favorites books as it was just a great adventure with a love story between the female half elf or elf and the human. One other thing I think may be part of the book was and I don’t remember if it was the human male or the female elf turned into a bear at one point. I appreciate any help of what very little I have to offer for clues.

 

[Cinderfall]

Long shot but perhaps "eye of the hunter"? It has a romance between an elf and a were-bear and has some "halfling" characters.

 

[Bagpuss]

Long shot maybe, but David Eddings's Belgariad series had Relg who was afraid of the sky because he'd lived underground all his life and Barak turned into a bear at several points. However, there weren't any elves or dwarves in that series, but the character descriptions would fit.