Why don't you like the fact that elves live on one tree??? Remember World of Warcraft; there's something called Darnassus. It's basically a giant stump, and there are tons of elves there. And if you consider that Heroes 5 sometimes feels like a harsh flashback to Warcraft 3 (the video in the main menu, similar creature models, a similar camera system), then it's not surprising that elves live on one tree, especially since they live on a huge oak (or whatever it is), not a dwarf birch...