1) Halflings *are* the 'fair folk,' and live 'under the hill' in warrens concealed within local woodlands. They are almost supernaturally stealthy, and they are the subject of all sorts of rumors, of cattle being 'elf-shot' or of little people under the hill stealing children or of mysterious crop circles or cattle mutilations (both performed to hide the fact that the halflings are stealing grain and meat, for their own supper!). Some may wear red caps, others may perform tricks, some may even be friendly and helpful, rescuing travellers lost in the woods.
2) Halflings have taken advantage of their small size and reduced need for food and drink to utterly dominate the seas, and halfling merchant concerns rule the seafaring trade, as halfling-manned vessels can hold more cargo for trade than the same size ship staffed by humans.
3) Halflings are born to humans, and vice-versa. Legend has it that they were either blessed, or cursed, to be born this way, and children born of the 'wrong size' are handed off to foster parents of the 'right size,' so that the vast majority of halflings are handed off by their human birth parents to other halflings to raise, while the occasional human also is raised by foster parents, after being handed off by halfling parents. In some areas, the two races exist side by side, in others the towns have 'halfling ghettos,' and in still others, where a halfling birth is seen as a sign of a curse or punishment, halflings are about as welcome in town as lepers, and a halfling birth to a prominent citizens is covered up and the 'little monster' disposed of, lest the birth be discovered and the parents stained with the implications that they did something to deserve being so punished. Cultures that go to this extreme regard 'normal sized' babies born to halflings as being some sign of a jealous halfling witch stealing the baby from some innocent human woman's womb through some diabolic art, and may attempt to 'rescue' the 'stolen baby.'
4) Halflings despise the name 'halfling,' not considering themselves 'half' of anything. They have names for themselves, but those names inevitably turn out to be the names of extended clans, and halflings from a distant clan will have a completely different name for their race. Names for the '
'halfling' race could include Huldrefolk, Hin, Fayen, etc.
5) Halflings are nomadic, driving brightly painted wagons that convert into barges with paddlewheels in a surprisingly short time. Some live up to their 'gypsy' reputation and live to swindle those whose communities they pass through, but the majority of them are honest folks with a strong sense of honor, and an unshakable sense of loyalty to their own kind. The arrival of a halfling troupe could become an impromptu carnival in towns that don't embrace the worst rumors, but it always seems that after the halflings move on, someone is quick to blame a lost cow or missing trinket on the 'gypsy thieves.' (Quite often to get away with evading taxes, by claiming that items of value were stolen, or to avoid settling a debt by quickly butchering a cow owed to a neighbor, and salting and concealing the meat for the winter, then claiming that 'those darned halflings must have stolen old Bessie! I'm sorry I can't pay you!') Just as in the real world, where 'those darned gypsies' were blamed for every single young woman's pregnancy (even if the child ended up with the same eyes as the young girls boyfriend...) and every single missing or misplaced item, a halfling troupe finds themselves a handy scapegoat for miscreants to point to after the fact, to draw attention away from themselves. The halflings, being long gone by the time the lies begin, have no way to refute these accusations, and their 'reputation' grows with each town they visit.