I asked the OED, always good for a laugh on the subject of garden gnomes and word etymology, and it considers "whimsey" a viable alternate form. I've included a few highlights from the OED definition...

whimsy, whimsey.
hwi.mzi, sb. (a.) Forms: 7 whim-, whymzie, whimsee, 7-8 whimzy, 8 whymsey, 7-9 whimsie, whims(e)y. See whim-wham

1. Dizziness, giddiness, vertigo. Obs.
Example -- 16.. Middleton, etc. Old Law iii. ii, I ha' got the scotomy in my head already, The whimsey: you all turn round

2. A wench. Obs. rare.
Example: 1625 Fletcher Bloody Brother iv. ii, You'l pick a bottle open, or a whimsey, As soon as the best of us

3. a. = whim sb.1 3.
Example: 1646 J. Hall Horæ Vac; 31 That whimsey of Pythagoras of the transmigration of Soules
Example: 1803 Jefferson Writ. (1830) III. 508 Plato, who only used the name of Socrates to cover the whimsies of his own brain.

4. = whim sb.1 2 a.
1906 E. V. Lucas Wand. in Lond. i. 14 The lodge in the garden of the Record Office. This little architectural whimsy might be the abode of an urban fairy or gnome

a. = whim sb.1 4. local.
1875 Ure's Dict. Arts III. 319 In Cornwall, a kibble, in which the ore is raised in the shafts, by machines called whims or whimseys.

7.a. Glass-making. (See quot.)
1856 H. Chance in Jrnl. Soc. Arts IV. 224/2 Still whirling, the table [of crown glass], as it is now called, is carried off, laid flat upon a support called a whimsey, detached by shears from the ponty, [etc.]

That's a good question. Here are some ideas on the subject. Really, we want the subset of urban fairy known as the "lodge fairy".

You may have hit on a possible research topic there.

The most worrying and intriguing information I wandered across when idling web-searching in answer to your question was this.

"If you want to visit a place where there are more gnomes than people, visit Southern Germany. In Germany, gnomes are copyrighted and can only be manufactured by one company. At the Czechoslovakian/German border, gnomes can be purchased at discount prices. Many German gnomes are of Czech descent."

My thing-a-day calendar is devoted entirely to the modern garden this year. None of the days thus far have defined what it means by "beauty", however. The calendar as a whole advocates a varied garden, with wild patches, with formal elements, cultivated woodland if available. It is certainly in favor of a well-maintained garden, wild or otherwise. I think it misleads when arguing against "unrelenting beauty", since what it really is saying is that a humorous surprise makes a nice bit of variety in the garden. It also implies that humorous surprise cannot constitute beauty at the same time, however elegantly done the topiary may be.

As for non-whimsical garden gnomes, I find an overdose of garden gnomes tends to be no longer whimsical and rather horrific instead.

My brain is now trying to design tasteful gardens involving pink plastic. Help!

An excellently well-balanced suggestion!

(See my new user pic!)