Exactly, the scouts can see height. They are drafting based on height (not solely, of course), which is a bias against shorter pitchers. There might be a bias for velocity, but that doesn't preclude there being a bias against short pitchers.
Not only in drafting, but in free agency and trading, there is a bias against short pitchers because of beliefs about velocity, performance, and durability.
I completely agree with you about command and movement.