After reading this, read the next section, How to Mix the Hammer Dulcimer
This is what my methods for recording the hammer dulcimer will sound like:
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I’ve found a room, about 8x8x8 with sound paneling setup to prevent room reverb is best; the dulcimer has enough natural resonance which causes conflict with room atmosphere.
Record in stereo! Unlike some instruments, you can’t effectively capture the complete hammer dulcimer with one microphone. If you’re tempted to record in mono for any reason, don’t do it. You’ll regret it one day. (And if you need mono in the mix for an effect, you can always convert stereo to mono.)
Personally, I like the sound of the hammer dulcimer to be very focused and responsive. I’ve found the setup shown in the photos to be the most effective for my desired sound. While there are those who may have good reasons to disagree, I think two microphones is best. I feel that whenever more microphones are added, the sound become less focused. Don’t try to make the microphone setup any more complicated than it needs to be.
The most important thing is the height of the microphone since this will effect the way it picks up the reverb and natural attack of the hammers. There’s no magic science to the heights since all equipment is different, just be sure to try different heights. Get the microphones as close as you can without interfering with the hammers or recording too much attack from the hits. (Also, I understand that the microphones with this setup may interfere with your vision…give yourself time and you’ll adjust) The bottom line for mic placement is this: you want the right combination of minimal attack and minimal reverb. If a sacrifice must be made, sacrifice slightly more reverb for less attack.
Also, the microphones in the photos shown are NOT the ones I record with. Do you really think I would share with you my top-kept-secret of the trade? 
When choosing a microphone, you want a large diaphragm mic which is extremely quiet and has a lot of sparkle. [hint]Audio Technica just might make a good mic.[/hint] Follow your engineer’s recommendation unless you are one .
Last but not least: use an analog preamp!. This will smooth the recording out and decrease the attack, saving you hours of mixing headaches. It will also create a warmer, more realistic sound. The preamp I used on Desire for Departure and The Entrance of Sound was certifiable the actual preamp that the Beatles voices flowed through for some of their recordings. So, it was ancient history fit for a museum, but in this scenario far out-performed a $15,000 21st century digital preamp which I sound tested along with it. There was absolutely no comparison.