Interesting Scenarios
I could see all kinds of interesting scenarios for this kind of world.
1) The elves (of all kinds) live in an alternate universe with connecting portals - most people do not believe in elves, but high level characters will, as they will have become involved in them. Some people will vanish as they stumble into the faerie circles and other portals. The elves perhaps are battling other elves - and the human world is the battle ground.
2) The elves are an elite, but small, group ruling over the humans by right of magical might. There are still good and evil elves, and they pit human armies against each other as they strive to control their resources.
3) The elves function as demons and angels, coming from alternate planes as helpers of the humans for their own ends, offering their magicla services to mankind (perhaps for a price) - which can be either good or bad.
I certainly don't like the idea of unified elves, as that reduces conflict - and, hence, story opportunities.