I think it's a stupid rule that you have to be evil to have your own race as favored enemy. If we look at the world today, you could say that many special forces have Favored enemy: human; they are trained to use human psychology and physiology to defeat their enemies, but that doesnt mean that they hate humankind.
Another real world example is the animal hunter. People who lives on killing animals often feel a profound respect for the animals they are hunting (look at the numbers of cultures who thanks the animals for letting them be hunted). Those people probably have Favored enemy: animals and dont have a problem with it.
The elf in your party is trained to hunt and kill humans, but that doesnt mean he have to kill every human he sees.
Another real world example is the animal hunter. People who lives on killing animals often feel a profound respect for the animals they are hunting (look at the numbers of cultures who thanks the animals for letting them be hunted). Those people probably have Favored enemy: animals and dont have a problem with it.
The elf in your party is trained to hunt and kill humans, but that doesnt mean he have to kill every human he sees.