I assume that traditionally dulcimers were tuned to whatever keynote sounded best. A luthier would "hoo in the hole," meaning sing into the soundhole and find the tone that resonated most saliently and then tune the instrument to that key.
Obviously if you are singing with the dulcimer, you will tune to the key that best fits your voice. And that might vary by song. I can sing some songs in D, but others I have to sing in C, C# or even G depending on the precise range of the melody.
For just playing, though I tend to switch between C and D depending on whether I am fingerpicking or flatpicking. I like the extra slack and the soft pull of the strings in C for fingerpicking, for that allows a more precise touch. But for flatpicking, especially playing fast, I want the strings tighter and with less give, so I tune to D. I also tend to flatpick back toward the bridge and fingerpick toward the 10th fret or so.
I think Ken is probably right about the timing of the switch from C to D. Whether it was specifically to play fiddle tunes or merely to play with other instruments in the keys of D, G and A, I am not sure.
But you are certainly correct, Babs, that the norm these days, regardless of what modal tuning one uses, is to tune to the key of D, at least on standard sized dulcimers.

Peter mentioned Down by the Sally Gardens as well, so I'll be learning that one and adding it for sure. Thanks!