Yeah even Tolkien was quick to point out that his elves were very very different from those of myths and fairy tales.
I think it very much depends on your gameworld's cosmology, but if you're going for a modern fae thing, then you might want to consider updating the concept of Arcadia or Faerieland or whatever you want to call it. Let's stick with Arcadia, for reasons that will be apparent soon.
IMO it might work for a game with heavy VR. NOT a traditional cyberpunk story, but kind of a "fairy story comes to life" setting where you have this dystopian world and the main characters are having fun playing MMORPGs to escape from the drudgery, oppression, and hopelessness of Real Life.
So the idea is that Arcadia at first is just a game, full of color and light and fun. Then some of the NPCs start to seem a little TOO real. It turns out that the VR has inadvertently become a gateway to Arcadia (literally an arcade made real; you can have the setting hosted on servers colo'd to greece if you want the triple meaning).
VR is the perfect analog for faerieland: that it's all illusion, mythos, following its own rules, people getting sucked in and losing time IRL, dangerous beauty, beings that are warm but oddly aloof and emotionally unreachable, the world run by complex rules that everyone understands but that to outsiders are incomprehensible, etc.
If you want changelings, you can even have the VR company secretly raising street urchins in VR to act as cheap AI substitutes to play NPCs. Bonus if they were stolen as infants and don't know they're in VR or that they're not AIs. Maybe THAT happens in Greece due to economic collapse; the servers are literally located in ??k????.
And/or you could go a step further and have a magic returns scenario where people learn to use magic to literally enter the VR world bodily, and maybe from there cross over to True Arcadia. Or have things come out.>>49961741
Also a good idea, but see >>49941537