A Puzzlement?

In the Silmarilion  we are told that only Eru ( the creator ) could make living beings and this power was not granted to the Valar ( lesser gods ). Okay I got that, only the Supreme being could do such a thing. It is told that Melkor ( the evil Valar ) created Orcs from Elves that he had captured and slowly through the darkest of magic corrupted their being and produced the Orc race and for this the Orcs hated him but feared him more and served him and eventually his lieutenant Sauron. It seems that the Valar could corrupt what was good and pure and therefore bring about new beings that were abominations of their old self. It is said the Melkor made Trolls from Ents, again perverting what is good and turning it to evil. He is credited with breeding the first Dragons. What he produced them from I am not sure. THe Valar did make many animals but again not mortal beings. Now we come to a part of the Silmarillion that confuses me. As i said the Valar were not supposed to be able to create mortal beings such as Elf or Man but we are told that one of the Valar named Aule was desirous of having some beings that could admire all the wonderful things he had made for he was the master craftsman of the Gods. So he went into one of the deep caverns of the world and there brought forth living beings. The Dwarfs. That is the part that confuses me as we have already been told that that power was not in them, but he seemed to have no problem doing so. Now as soon as he had created them Eru the creator spoke to him and asked him why he had done this thing and Aule admitted his having fallen into folly. He took a great hammer to kill them but Eru stayed his hand saying that these beings had life and for Aule not to take it from them,but since the Elfs had not yet awaken into the world he put the Dwarves to sleep to be awoken at a later time after the Elfs had awoken unto the world. A nice story but one that seems to me to be at variance with what was written about what the Valar could and couldn't do. If anyone has a good explanation I would love to hear it.