Elves & Fairy have bothered me in original Dungeons & Dragons going all of the way back to my gaming roots. And here's why, if we look deeply into definiation of Elves from both Wiki & the Encyclopedia Britticana
"An elf (plural: elves) is a type of humanoid supernatural being in Germanic mythology and folklore.In medieval Germanic-speaking cultures, elves seem generally to have been thought of as beings with magical powers and supernatural beauty, ambivalent towards everyday people and capable of either helping or hindering them. However, the details of these beliefs have varied considerably over time ..." And if we dive into orginal Dungeons & Dragons & the rule book we get the following;"Elves can begin as either Fighting-Men or Magic-Users
and freely switch class whenever they choose, from
adventure to adventure, but not during the course of a
single game. Thus, they gain the benefits of both
classes and may use both weaponry and spells. They
may use magic armor and still act as Magic-Users.
However, they may not progress beyond 4th level
Fighting-Man (Hero) nor 8th level Magic-User (Warlock). Elves are more able to note secret and hidden
doors, able to locate secret passages on a roll of 1-4.
At the referee's option, Elves may be allowed the
chance to sense any secret door they pass, a 1 or a 2
indicating that they become aware that something is
there. Elves have the ability of moving silently and are
nearly invisible in their gray-green cloaks. Elves armed
with magical weapons will add one pip to dice rolled
to determine damage, i.e. when a hit is scored the possible number of damage points will be 2-7 per die."
And no this isn't the first time we've covered Elves on this blog. Back in 2018 I did whole retrospective on them & yes I still subscribe to those beliefs there.
The Elves back story within Tolkein is explored very nicely in this video here But how can you have both a mythological view point & the Tolkien view within a campaign?! Easy there are different kinds of Elves created by different gods via many different time & space continuums. Elves and Fairies are distinctly different & in some cases very much far more then rivals.
Puck, Act III, scene ii.
William Shakespeare
The Fey or Fairy cause headaches because of the fact that their origins are obscured in the mists of legend or mythology. Or are they?! There are multiple origins for these beings but let's go with the demoted angels, pagan gods, & demons theory from legend & use the wiki entry explaination here;"A Christian tenet held that fairies were a class of "demoted" angels.[15] One story described a group of angels revolting, and God ordering the gates of heaven shut; those still in heaven remained angels, those in hell became demons, and those caught in between became fairies.[16] Others wrote that some angels, not being godly enough, yet not evil enough for hell, were thrown out of heaven.[17] This concept may explain the tradition of paying a "teind" or tithe to hell; as fallen angels, although not quite devils, they could be viewed as subjects of Satan"
King James, in his dissertation Daemonologie, stated the term "faries" referred to illusory spirits (demonic entities) that prophesied to, consorted with, and transported the individuals they served; in medieval times, a witch or sorcerer who had a pact with a familiar spirit might receive these services.[19]
In England's Theosophist circles of the 19th century, a belief in the "angelic" nature of fairies was reported.[20] Entities referred to as Devas were said to guide many processes of nature, such as evolution of organisms, growth of plants, etc., many of which resided inside the Sun (Solar Angels). The more Earthbound Devas included nature spirits, elementals, and fairies,[21] which were described as appearing in the form of colored flames, roughly the size of a human.[22]
Arthur Conan Doyle, in his 1922 book The Coming of the Fairies; The Theosophic View of Fairies, reported that eminent theosophist E. L. Gardner had likened fairies to butterflies, whose function was to provide an essential link between the energy of the sun and the plants of Earth, describing them as having no clean-cut shape ... small, hazy, and somewhat luminous clouds of colour with a brighter sparkish nucleus. "That growth of a plant which we regard as the customary and inevitable result of associating the three factors of sun, seed, and soil would never take place if the fairy builders were absent."
Now there is a third race that we see in Lamentations of the Flame Princess's 'The Pale Lady' by Zzarchov Kowolski. A type of horrid rabbit pagan goddess that we see has many of the characteristics of a demoted or fallen god that has become a type of fairy horror.
The Pale Lady might also may an excellent modern horror adventure unto itself. And crosses into the realm of demoted pagan gods & once again the wiki fairy entry;"At one time it was thought that fairies were originally worshiped as deities, such as nymphs and tree spirits,[24] and with the burgeoning predominance of the Christian Church, reverence for these deities carried on, but in a dwindling state of perceived power. Many deprecated deities of older folklore and myth were repurposed as fairies in Victorian fiction (See the works of W. B. Yeats for examples)."
Recently the revamp of Cthulhu Dark Ages has the Old Ones which seem to bridge gap between the classic mythological concepts & the Fey according to the CDA book;"Most myths of mankind mention the existence of a race of
intermediary beings between men and gods. Despite the
many names given to this race, most descriptions draw a
disturbingly consistent image of what the Necronomicon
calls, “the Old Ones.” Don’t confuse them with the Great
Old Ones. As the Necronomicon writes, “Great Cthulhu is
Their cousin, yet can he spy Them only dimly.”
The old ones are spirit-like entities serving Yog-Sothoth. They are naturally invisible but often manifest as
a halo of light that makes them shine like stars. In fact
these beings can appear in all sorts of ominous ghostly
shapes, from beautiful maidens to dreadful things with
golden wings and bronze talons. Some accounts also allude to the unwholesome smell that accompanies them.
Old ones have the gift of being able to move very quickly,
and even, some say, to be everywhere at once.
The old ones are innumerable, they know neither
good nor evil, and they walked the earth long before
mankind. Now they wander forever, “not in the spheres
we know, but between them”—the ultimate abyss filled
by Yog-Sothoth"
And this really seems to be in line with the ideas put forth in Clark Aston Smith's Zothique setting. And in the deep end of the Qliphotic lore of the CAS Zothique literature.
This again is something that we find deep within the back end of Mystara via X2 Castle Amber By Tom Moldvay. 
In terms of a modern Earth prime it means that X2 may have points that connect to the waking world or the underworld of the Dreamlands. And those mists that surround X2 may be more dangerous then then even the PC's have a clue about. The world of dreams isn't bound by normal space time but something far more dangerous. This isn't to say that they can be used to cross on purpose from one point to another in history but these may cross worlds or points in history where things can be far more unstable. This means that the magicks that the Ambervilles may connect into far more insidious issues then even their aware of. And it also puts both the player's PC's and others at risk. Perhaps even the modern Earth as we know it.
