What an interesting thread, with room for all parts of the spectrum of Fortean approaches to a subject.
There are things that you can see or experience that exist outside of your body, and yet which lack any solid existence of their own. Examples include a rainbow, a reflection and an echo. Two people a hundred metres apart can see a rainbow at the same time, but it is not the same rainbow.
Dismissing hundreds or even thousands of years of fairy lore from a wide range of cultures with reductionist explanations like "a race memory of an earlier bronze age people" is no more "scientific" than some airy hand waving explanation by analogy with references to planes, dimensions, or wavelengths.
Likewise, dismissing it all with a generic psychological explanation misses the point.
Fairies are like fear, love, and hope: they exist in the sense that people experience them, they do things to appease or encourage them, and they allow their belief in them to affect their own behaviour.
Here's my thought on fairy land. It has happened to me a handful of times in 58 years. I first had this insight when I went to Bampton in Oxfordshire to watch the traditional Morris dancers. I drove round the corner and there they were outside the pub, dressed in clean fresh brilliantly white costumes, lit by a shaft of sunlight, their lines straight, and every man off the ground at the same time, and they looked perfect. For the rest of the day, they were a bunch of mainly middle aged men in slightly grubby whites who had enjoyed a pint and were going through the motions of their traditional dances. In that first moment when I saw the they looked exactly like they ought to look; for the rest of the day, they looked like they really are.
There are moments when everything is exactly as it should be. There is the moment when the low afternoon sun brings out the golds and yellows in the birch forest, when the ground underfoot is dry and carpeted with leaves that are golden and not yet decayed, and when you glance in the right direction just as a jay or a green woodpecker rises from the ground. You step on a dry twig and the sharp crack of it breaking echoes and that is the only sound you can hear. A moment later, the sun has gone behind a cloud, a group of mountain bikers goes tearing past, and you notice that the path is strewn with litter. That first perfect moment was something like fairy land.
It is almost like deja vu, which I have experienced a few times. It is a moment of perception that is gone almost before you notice it.