Originally, you are correct, the Dwarfs would presumably have accepted a truthful apology or a like for like shaving but there was escalation from the beginning. Firstly, the Dark Elves attacked a Dwarven caravan, killing many Dwarfs. The Starbreaker sent a message to Lothern demanding an apology and recompense. Caledor II refused and so Starbreaker sent an envoy in the form of an ambassador to Lothern but the argument got out of hand the the envoy brandished an axe. Subsequently, instead of killing him, as was right under Elven law, Caledor sent him back shaved and the war began. The head of the King and Phoenix Crown may not have been suitable recompense for a shaved beard, but it was for 400 years of slaughter.