I love the concept, but . . .
I love the idea of innately magical human-like beings whose relationship to time is, shall we say, a bit more voluntary than ours. However, I am often disappointed by how this is represented in most games, particularly D&D. In addition, I think that too often the psychological aspect of elves is ignored or simply defaults to "humans that live a long time." It also doesn't help that magical, immortal, human-like beings often comes with a lot of additional baggage that renders the idea stale. Baggage such as having a particular reverence for nature or xenophobia.
I tend to prefer having that not be the core element of their psychology. Heck, it'd be cool if the virtual immortality thing were something that humans latch onto, rather than something that the elves themselves consider noteworthy.
HUMAN: So, unless something actually kills you, you'll life forever, right?
ELF: (Nonchalant) Yeah.
HUMAN: How do you feel about that? I mean, doesn't it make you sad, knowing that you'll outlive everybody that isn't an elf?
ELF: Can't say that it does.
HUMAN: But--- but--- it should, shouldn't it? You're practically immortal, and everything just fades and dies.
ELF: You're not making any sense. I'm going to have a beer with the dwarf.
What if, instead of immortality, it's magic that differentiates humans and elves? I don't mean magic as something you do, but something you are. Elves would essentially be humans as they often believe they want to be: beautiful, powerful, and free from certain death. In a word, magic creates elves as humans unbound by the ordinary: ordinary cares, ordinary activities, and ordinary passions. They are the yearning for wonder manifested on collective scale. Unlike human magicians, elves are innately wonderful (in the Pratchett sense).
Of course, not having to worry about "small" stuff like eating, sleeping, going to the bathroom, and so forth would have profound effects upon one's psychology. Said briefly, most elves would be psychotic by human standards. Look at how some celebrities seem to lose touch with everyday reality because they don't have to deal with it as we do. Imagine a nation of people like that.
It goes without saying that without grounding in everyday reality, it's hard to cultivate virtues like compassion, humility, and temperance. It's not that they are incapable of empathy or self-control, but their natures are much more extreme. Their emotions are stronger and purer. They are not prone to mixed feelings and lukewarm passions. They do not have hobbies; they have obsessions. They are not merely attracted to someone; they are consumed with lust. They do not have spouses; they have soulmates. Elves do not experience irritation or annoyance; they feel murderous rage.
The intensity of elven passion can be unsettling to witness, but their dispassion is positively terrifying. When elves do not have an emotional attachment to something, they can be calloused and even cruel. This is not out of malice or a perverse joy in the suffering of others (though such elves do exist). Rather, it is the complete lack of empathy. In this sense, one elf's idle curiosity can be one human's unspeakable torment. A group of elves getting together for light merry-making can be absolutely decadent by human standards. With experience, they can modify their behavior or put situations into perspective, but that does not mean they will be especially easy to deal with.
What makes this so interesting is that one can easily represent this mechanically without making them into demigods or weaklings. I do have mechanics for the elves I describe above, but I'll only post them (in House Rules) if someone is interested.
