Below is my own take that we've used in our Greyhawk/Yggsburgh/Zagyg campaign. I surrendered to how players would play elves et al as humans with different stat bonuses, but wanted a rational for why demihuman communities and npcs would be different and separate from the mostly human setting, for tension to exist between isolationist elves and expansionist human nations.
Each player with an elf or gnome would get a copy of this although it is written from the elf perspective. If I was to rewrite it I would make it more concise. If DM prepared setting material is over a page you run risks of making the campaign for the DM's self indulgence and not about the player's actions. Players won't read or remember more than a page anyway. A player's advice to me some campaigns ago: 'you've got a great campaign, but you spend too much time on the details of each brick of the yellow brick road when we just want to get to the flying monkeys.' Humbling yet good advice.
Of Elves and Men
Long ago Corellon Larethian created the beings of grace that are the elves from mist beneath the crescent moon. We lived lives of beauty and truth, communion with the faerie and with the material world.
This magic of fey mists sustains us still. This connection with sylvan essence allows the elves to cross the bridge between the faerie world and the physical plane of mundanity.
Singular elves are not threatened by not sustaining their relationship with the faerie world. But the lifeblood, the grace magic, the fertility, of elven communities is endangered by too much corruption of mundanity. Elven communities and faerie forests must limit their contact with nonmagical beings such as humans (let alone filth of evil such as orcs) or risk losing their special quality and perhaps even face extinction.
Elves not within the world of faerie are still elves, but they may be sterile until they return. A few humans living peacefully within an elven forest may not threaten the magical bridge, but their presence may cause the fruit of wholly elven unions to be merely half-elven.
Yet Corellon's gift of life still returns like spring eternal. In remote forests, in sylvan settings outside the footprint of man, his grace descends in mist from the moon. New elven communities bring their grace onto the world in these places.
For this reason (and not mere prejudice or intolerance of lesser beings), elven communities have long protected their borders. A closely guarded secret, it has been determined that other fey demihumans, such as gnomes have a similar connection between this world and another. Halflings less so, as they breed prodigiously. Gnomes may spring forth from even the smallest deserted pretty hillock. But dwarves require isolated and dank caverns as special in their own way as the forests of the elves.