Any chance a sword and board pally will work?

[eonfreon]

Think so, yes.
And if you get the +2 from guild ship buffs (which not everyone has, keep in mind), I'm assuming you can also get the +stat buffs while there, or even drink a yugo pot or something. They tend to go together.

I think 12-14 is the sweet spot IMO. Which is also why I favor THF on the S&B setup. S&B + TWF = some wasted dex. S&B + THF synergizes much better.

Understood. A TWF would rather never have to go S&B unless absolutely necessary. But AC-wise, if he needed AC, he would equal a "ideal" AC THF given the same configuration and perhaps exceed by a point, depending on gear.
The THF Dwarf would have the dps edge over a TWF Dwarf if both were forced into S&B, because the free Dwarven Axe synergizes well with THF Feats and chances are has a slightly higher Str (depends though, with such a high Dex of 12-14, he might not actually).