I know our mythology, but the dev is creating his own story, and I'll let his lore reveals fill in the blanks for me (I'm trying to avoid my own mythology bias with this story).
I was not suggesting that the Alfar in the Pussy Twister was anyone But one of the 'light elves.'
The presence of an elf in this establishment could mean many things - banished, some form debt to be paid, dancer/informant, etc.
We just don't know.
Whoever the third party is, they likely have access to high level illusion casting capable mages.
Are they some type of elf, human, or even a mixed-race group including an as yet unidentified (to the MC) race intent on damaging the Templars and elves with some ulterior motive as yet unknown?
We know the hellspawn we've met are involved, but beyond committing murder and mayhem, is there a guiding force (Demon only or something else/more) with larger strategic goals in mind?
These mysteries are part of what makes this story so interesting to me.
I even mentioned to Ceolag that a 'Known Lore' section, in AVN, would be helpful as some - like me - want to try to keep track of everything (if only because I'm likely to forget what Min Ebra and Ainu mean without some type of refresher ahead of the next CH release)!
Cheers!!