I think the reason for this can be found in the FFC - there was only one major Elven PC (Menander Ithamis), and the Elves basically acted as Deus Ex Machina to win Castle Blackmoor back, similar to some stuff we see in the Shannara novel series.
So, the background for the Elves was not prevalent in the game, except for a very small part.
Now, when the setting was advanced 30 years for the DA modules, the authors chose to establish that friendship between the Elves and the humans that in the FFC time had been mainly a footnote.
So, this is why this discrepancy was established - the Willow Queen of the Westryn is really more akin to the Queen of Norns from Tad Williams' Osten Ard series than anything else.
But this, really just as a comment: Ask Jared about some of the specifics; IIRC he told me once that he was in charge of the Elven arc in the MMRPG, so he probably had the biggest insight into the matter. :)
Also, don't get all defensive when I am not playing along 100%! :)
Your approach is as valid as mine, or anyone else's.
For further fleshing out your vision of the Elves, here's a hint:
Ringlo Hall is really a Tolkien reference, the Ringlo being the river leading to the city of Edelhond.
http://tolkiengateway.net/wiki/EdhellondI have gone there in my campaigns, and the MERP stuff on Edelhond is basically what I use for Ringlo Hall.
If I ever rerun The Redwood Scar, I will post some notes on this. :)