It would be a Battle of the Fore-arms. You'll see that in every contract. It's called a "sanity clause". Ha-ha. You can't fool me. There ain't no Sanity Claus.
Because popeye has tiny little joints which means he wont have decent strength for his size (usually) due to muscle insertions and load bearing capability of the joints.
whereas dwalin, though short looks to have acromegaly so will have very thick dense bones.
that or just let dwalin eat the spinach or throw an axe at him, lol.
Extremely one sided fight, Popeye would probably punch him into the Blessed Realm, and a few moments later the rest of the dwarves, Bilbo, Gandalf and Smaug would follow.