Yeah, just rewatched the latter half of the season 2 finale and that makes more sense now.
Also, think I got it wrong about the Giant being the dwarf's doppelganger. He says "one and the same" while sitting next to the dwarf but he's most likely referring to the elderly bellhop, whose place he took immediately prior to sitting down. And this wouldn't necessarily make the elderly bellhop his doppelganger, just a disguise.
The dwarf does have a doppelganger, though--the milky-eyed dwarf Dale sees when he goes past the waiting room. The dwarf had told Dale that when he next saw him, he (the dwarf) would not be himself, and the milky-eyed look is how all the other doppelgangers (Dale, Laura, Leland, Caroline) appear in the Lodge.
And when the dwarf evolved into a weird tree, so did his doppelganger.
Weird that he has a doppelganger, since his (and MIKE's) actions in FWWM are definitely evil. Maybe the dwarf/MIKE represent a kind of lawful evil within the Black Lodge and the yellow-headed tree doppelganger (possibly in league with BOB?) wants to smash all the rules.