I was at first falbbergasted and appalled, but apparently, since it did nothign to your relationship, you guys are the type of people who flame on off-topic discussion boards...
You speak your mind, as openly and honestly as possible. Your relationship is not gifts, it is honesty. It hurts when someone does not like a gift, but obviously you guys treasure honesty above all else, including gifts and social graces.
I personally would never do such a thing anymore, allthough in the past, I have told peopel I did not like their gifts, and years later, it tore me up inside for sayign such things. Only my girlfriend knows now if she got me a gift I didn't like... and I feel bad, but we too treasure honesty and communication above all else.
I hope they call you and ask you for the gnomes, maybe for some halloween lawn ornaments.
I can also throw in some 2-bit psychology. You said they loved knick knacks and such, yet for soemreason do not like gnomes.
What they do not realize, is knick knacks by nature are quite, "classless", IMHO.
(please knick knack lovers, do not take offense). They are silly, tawdry, artistic expressions of the placer. Both of them had it in their mind, and I am sure have even discussed it, how "cliche" and "classless" gnomes are. They probably even consider those who have gnomes in their yards to be beneath them. this allows them to distance themselves from the other classless knick-knack gardens they see, and consider theirs "better then everyone elses".
to sum it up: subconscious self-loathing.
Allthough this could be seen as disturbing and wrong, it is really human nature, and everyone does it with just about everything.