Initially, Demons were fallen angels...
But there was life in Hell, and those who are now called demons lived there...
And these fallen angels captured them, or perhaps tamed them...
As for the elves becoming Native Americans... I agree with Xaker's point of view... but with an addition...
They just watched too many Westerns... :D
They drank too much... :D
And they fell from the tree... :D
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