Your point is perfectly valid and reasonable, but it doesn’t really address mine. You’re simply presenting an alternative perspective without addressing the elements of the perspective you’re refuting. It’s an acceptable position to have, but it’s not a rebuttal.
To your point, there are similar lines of reasoning for why orcs and drow aren’t problematic which were generally regarded as sufficient ten years ago but which no longer pass muster today. The idea of an insane humanoid (in appearance) murder “elemental” is totally the kind of thing that could come to be seen as problematic in the future. Redcaps come from folklore, just like goblins and elves and dwarves, and are generally regarded as a proxy for the “other”, just like goblins and elves and dwarves. The mechanical qualifier “fae” instead of “humanoid” may not be regarded as a sufficient distinction in the future. We’ll see which way the wind blows.