I don't know a lot about what traits are dominant and recessive.
Hot is dominant to non-hot.
Dwarf is generally recessive. There are more than one gene for dwarf. Perhaps some are donimant, I don't know.
The start you proposed would work probably. Selection in the F1 would not do much either way. Selection in the F2 and later would be more effective.
Some use what is called Single Seed Desent. With this method, you inbreed for a few generations before selecting. You grow many F2 plants, then grow one seedling from each of those and one from each of those for a few geneations. Then you compare the lines after they are each breeding true.
Self pollination woould be important. Peppers are generally self-p[ollinated, but you will want to decrease your chances of out-crosses, as you might loose years of selection by a chance outcross.
Myself, I find there are already plenty of very hot peppers. I am going for milder ones, and better peppers for bonsai.
Walter

thanks walter thats exactly wat i wanted to hear. does neone know the effects of the dwarf gene and if it is linked with neothers. cheers