I’ve been trying to find a link to this movie all day. I think it’s recent (within the last 3 years or so). Plot (as far as I can remember) is that someone’s best buddy is dying, and wants to see a magical (elf, leprechaun, gnome) before he dies. So the buddies kidnap a dwarf and keep him in a cage, dressed up like said magical being.
That’s all I remember from the trailer.
probably wrong but there is apparently a scene similar to what you’re describing in “Movie 43”. an article with caps:
http://www.dailymail.co.uk/tvshowbiz/article-2212523/What-wee-little-leprechaun-Shrunken-Gerard-Butler-unrecognisable-dons-bushy-beard-play-Irish-fairy-new-comedy-Movie-43.html