This is about my current campaign, so anyone who's in that campaign (or about to make a guest appearance) might want to look away and come back in a few months' time.
Now when it comes to non-Tolkien elves - faeries, sprites, terrible monarchs and rotund little toadstool nobodies - and the human types that seem to crop up alongside them - roguish seducers, merry bards, manic pixie dream girls, pratfalling authority figures - there are three ways you can go.
You can go serious, as Gene Wolfe in his Wizard Knight series and Susanna Clarke in Jonathan Strange and Mr. Norrell and Christina Rossetti in her poem "The Goblin Market" handle the fairy world, as Hermann Hesse (I warned you) in Narcissus and Goldmund handles the devil-may-care second titular character. There is magic, there is enjoyment, but it's glimpsed from a sober vantage point, and there are consequences. Terrible consequences for the faerie magics that annihilate space and time and cause and effect, tragic consequences for the thoughtless seducer like Goldmund or Don Giovanni.
You can go wistful, like Hope Mirrlees did in Lud-in-the Mist, like Shakespeare did in A Midsummer Night's Dream, like Neil Gaiman who avowedly was inspired by Mirrlees' approach, like rakes and fops in Restoration comedy. The fairy realm is strange and frightening, the seduction and carousing disruptive, but the overall mood is kindly and comedic. Out of the roleplaying materials I've seen, the closest thing to successfully evoking this kind of atmosphere is a One Page Dungeon contest winner, The Faerie Market (pdf link).
(Back to literature, let's not forget Jack Vance's wonderful Lyonesse, navigating its fairyland with skill between the dreadful and the merciful.)
Here's some advice for anyone trying to write a lighthearted adventure: You are not writing jokes for the DM to read aloud. You are setting up potentially funny situations for the DM and players to work with, which is the only way there is going to be laughter at the table. So, please do not write boxed text in a Renfaired-out, Keebler O'Shaugnessy voice. Do not wink and leer about the naughty goings-on, especially if your coy innuendo is laid on so thick that we have no idea what's going on and we're forced - forced I tell you! - to come up with perverted possibilities much worse than what you probably intended.
Anyway, even with that stylistic chaff out of the way, there's something in me that rebels against going full-on twee. This is why the aspect of faerie fiction that grabbed me most in the lead-up to this campaign was the addictive, disinhibiting "fairy fruit" explored by Rossetti and Mirlees. So the base for this campaign is turning out to be a kind of "Hamsterdam" from The Wire, the town of Famorgane through which both licit and illicit trade between the theocratic Inviolacy and the elven and faerie realms is conducted.
And naturally, there's a local strongman movin' that fairy fruit - "The Greengrocer," Anton the Mountain. Last night the party had some entertaining interactions with him, trying to sell off the purple worm ivory they had brought with them from the previous adventure, and somewhat unwittingly being tried out for roles in his gang, before setting out on their quest for Red Tam's bones.
There's time enough for fairy rings and little people later on, the way the adventure is headed. It's just amusing to realize that I've got to grit up my twee with some gangster to make it work for me.