I would give the Dwarf the benefit of the doubt, and say his blue costume is supposed to be "comic book black" like Superman's hair, a way to avoid big flat black areas (which often reproduced poorly).
I confess guiltily that The Black&Blue Dwarf appeals to me. The off-the-wall collection of assistants and the Dwarf's anarchic sense of justice smack of pulp magazine heroes. I wish someone better than Paul Gattuso had drawn the series. I can't stand him. Imagine someone like Bob Fujitani or Irv Novick illustrating these stories.
Link to the book:
Red Seal Comics 14