Thank you for the detail.
So the elves or Alfar can be trained to become physically like humans and the humans can be trained to become physically like elves or Alfar?
And, the elves or Alfar have the same culture as the humans?
If so, why are they actually the same thing where the elf or Alfar was raised in the spirit/nature world and the other was raised in the material world in human shape?
It can be that simple.
Your character is a particular waterfall of a particular mountain. He likes being the resounding plunging currents. He is a prominent waterfall that humans notice and find significant. This waterfall has a strong mind and forms a strong mental impression among humans. This strong mind can manifest magic. The waterfall is curious about humans and decides to become a human, figures out how to do it, and does. The waterfall is a conscious sapient person − a nature being. Its mind projects outofbody during a magical trance. The mind visualizes the self-identity of a human, and manifests a human form, and becomes a human creature of flesh and blood. He immigrates from one kind of nature being to an other kind of nature being. In the same way a human shaman who projects outofbody still feels a link to her body, he still feels a link to his waterfall and can return to it. Meanwhile, he is truly human. If he isnt careful he might die as a human, tho normally he would revert to the waterfall before the human death happened.
To represent this nature being in D&D, it is possible to use the Human species stats. Then it helps for there to be a Nature Being (Vættir) Background. The Background feat grants a special relationship to a specific feature of nature, in this case a waterfall: the character can revert to this nature feature while the human body vanishes, then back into the human form. The character remains Conscious while being the natural feature. The Skills would be ones pertinent to the concept. In Norway, the waterfall connotes beauty and charm, as well as extreme strength and deadliness to drown, and within its rushing waters one can hear the most beautiful music possible. Skills like Persuasion, Athletics, Intimidation, Survival, Nature, Insight. A musical instrument proficiency would be inappropriate for the Viking Period but appropriate for the Renaissance Period. A Bard is an appropriate Class to choose. But if the waterfall is curious about being Human, any choice of class is possible.
Note, the waterfall has a choice. The waterfall can choose to manifest as an adult human without a childhood, or as a vulnerable infant then growing up as a human.
The waterfall is a concrete example of what a nature being is. The Norse Alfar is specifically a manifestation of sunlight. The Scottish Sith is specifically a manifestation of fertile soil.
Nature Being can be simple: Human with a special Background.
That said, there are specific concepts relating to the Norse Alfar. More than just doing magic, they are magic itself, and personify magic. Because they are "fates", there is direct equivalence of meaning, between a seer prophesying someones fate, speaking words to change someones fate, and using speech to alter reality itself. One can see a similar shift in the British folkbelief with "fatum" (fate), whence "faie" (fey), whence "fairie" (magic).
The Alfar and the Dvergar are antitheses of each other. The Alfar speak the good fate of success. The Dvergar speak the ill fate of unsuccess. The unsuccess is mostly about futility − the life is decent but without much impact on others. But unsuccess can be about destruction, which is why Dvergar make the best magic weapons.
I am mostly on board with the One D&D Elf. Its features describe innate magic. The only difference between one Elf culture and an other Elf culture is the choice of which spells to cast. I feel this can represent how the Norse Alfar is "innately" magic. The hint of magic is telltale enough to convey this "human" comes from a nonhuman origin. For the rest of the magical skills the Alfar needs to study and practice, the same way the Humans do. In D&D take levels in a caster class. For the Alfar, Bard and Paladin are solid thematic choices, but any caster class is suitable. The Alfar are known for being "many-knowing", able to master any kind of magic.
Here are the traits of the One D&D playtest UA:
ELF
Creature Type: Humanoid
Size: Medium
Speed: 30 feet
Lifespan: 750 years on average
Darkvision.
Fey Ancestry. Charm Resistance
Keen Senses. Perception
Trance. Sleep Immunity, 4-Hour Long Rest while Conscious.
Elven Lineage. [Magical Talent], Cantrip, Slot-1 Spell at Level 3, Slot-2 Spell at Level 5.
Here, what I call the Lineage Magical Talent refers to certain listed traits: Drow improves Darkvision, High can swap the Cantrip, and Wood improves Speed. I perceive these to be a choice of magical alteration, similar to a Warlock Invocation. Something like magical Half-Feat.
For the Norse Alfar, and for every D&D Elf, I would make the following tweaks to the One D&D Elf.
Note, I am over the over one hundred different kinds of D&D Elf traditions. I want one simple Elf with one set of traits that is versatile enough to represent any of these Elves of D&D. By means of letting the player choose the spells that one can cast innately, this one Elf can represent a High culture, a Drow culture, a Sea culture, or any other kind of Elf. Likewise, I can use this same versatile D&D Elf to also represent a mythologically accurate Alfar or Sith.
Here is what the D&D Elf can look like:
ELF
Creature Type: Humanoid and a Planar Origin of your choice.
[Note, an Elf can be an Eladrin Fey or Celestial, a Shadar-kai Shadow, a High Elf Material, an Astral Elf. Any Planar Origin is possible. Because the Norse Alfar is sunlight, this is something like an Elemental relating to the luminous Fire of sunlight thru the Air of the sky.]
Size: Medium
Speed: 30 feet
Lifespan: Immortal, you reach physical adulthood around age 20, then remain eternally youthful.
Elf Ancestry. Charm Resistance.
At Higher Levels. When your character reaches Level 14, your Charm Resistance improves to Magic Resistance.
[Note, Eladrin monster statblocks have Magic Resistance, as do many Fey.]
Trance. Sleep Immunity, 4-Hour Long Rest while Conscious.
[Note, Trance is a D&D-ism. But it is not so terrible to represent the bond with ones natural feature. The Alfar would be mentally with the shining sunlight during the trance.]
Innate Spellcasting. You are the magic of fate and wield it innately. You gain two Cantrips, a Slot 1 Spell and a Slot 2 Spell. See the Elven Cultures table. When you create your character, you can gain the spells that are typical for your Elven Culture, or choose other spells of the same slots. Decide your casting ability: Intelligence, Wisdom, or Charisma. You can cast each of these spells once after a Long Rest. Additionally you can use any Spell Slots (or Spell Points) to cast them. These spells are innate, thus you cast them without a Spell Focus or Spell Components.
[Note, the innate spells of Slot 1 and Slot 2 are available at Level 1. But there is no automatic Darkvision, Perception skill, nor Lineage Magical Talent. The Elf design is simple, versatile, and straightforwardly about innate spellcasting. There will be a Darkvision Cantrip and a Waterbreathing Cantrip, that a player might choose for their innate Cantrip. There is too much Darkvision in 5e, and it is wrong for a sunlight Alfar. But it is available as a choice for a Cantrip if a player wants it. A DM can easily create a new Elf culture by deciding the prominent spells that are typical for it.]
ELVEN CULTURES
Astral: Light, Sacred Flame; Bless, Misty Step
Drow: Darkvision, Dancing Lights; Faerie Fire, Darkness
Eladrin: Frostbite, Sacred Flame; Charm Person, Misty Step
High: Prestidigitation, Mage Hand; Detect Magic, Misty Step
Sea: Darkvision, Waterbreathing; Speak with Animals, Enhance Ability
Shadar-Kai: Darkvision, Resistance; False Life, Misty Step
Wood: Darkvision, Druidcraft; Longstrider, Pass Without Trace
For mythological accuracy, several D&D spells might make sense for the Norse Alfar and the Scottish Sith.
Misty Step can kinda-sorta make sense for both: there is an account where an Alfar moves invisibly thru a keyhole, traveling via thought, and the Sith vanish and appear from the Fey realm and the theme is insubstantiality. Other spells can relate to some accounts. A folkbelief can inspire a new D&D spell. I would like to see a Sith spell (or ritual) to visit in a quasireal way someone dreaming nearby but in an other plane. Also, the Scottish Elf is known for shooting magical arrows, a suitable
Elfshot Cantrip (visualizing like the D&D cartoon Ranger energy bow) with invisible arrows that deal painful psychic damage and at zero hit points inflicts the Paralyzed condition instead of Dying. For the Alfar, the
Light cantrip is a must-have, especially the body glows the aura of sunlight. I am torn between
Prestidigitation for spontaneous magic versus
Resistance for a helpful fate.
Bless is for fate. Here
Suggestion associates with charm, beauty, illusion, and compulsion. Abjuration healing magic can be appropriate too. Maybe a new Wildshape-like spell can grant an alternate form, like a swan, wolf, or snake, chosen ahead of time when prepping the spell.
It is good when the player can choose these innate spells for ones own Elf character. Whatever makes sense to the player is accurate enough to convey being good at any kind of magic. Examples of possible choices.
Alfar (Norse): Light, Resistance; Bless, Suggestion
Sith (Scottish): Druidcraft, Elfshot; Cure Wounds, Misty Step
In sum, a player can use either a normal Human or better yet the Elf above. In either case, a Nature Being Background helps to establish a special link with a specific feature of nature. For the Alfar it is sunlight. For the Sith it is an area of soil of lush vegetation, typically nourishing a cluster of trees. The specific Sith feature might be a nearby location that is simultaneously above ground and below ground, like an earth mound above a flat area or a cave in a cliff.