M0nica
Where do fairy stories end and fantasy begin? Anthropromorphic animals, cartoon characters, living dolls, borrowers and all of the many unreal characters that populate children's books, none of these are real.
When I was a child, we stayed in a B&B where the owner had acollection of real original, mainly German and Scandinavian 'fairy' and folklore books. These stories were most emphatically not stories for children. The fairystories children get are comprehensively watered down and bowdlerised.
The original stories, as I read them in my holiday bedroom, were frightening, cruel and violent. I was 13 and, when we lived in Malaya as a 10 year old. I had read unedited descriptions of what happened to British soldiers in Japanese prisoner of war camps. These fairy stories gave me nightmares the way the stories of horrors in pow camps never did.
Interesting to read your post. We need to ask the children what they like best. There are many very good children's writers like Michael Rosen and Jacqueline Wilson who may not deal with pure fairy but do explore sympathetically a modern childhood. And more will follow in future. The Harry Potter stories seemed to be a hit with a generation of children with all the magic and as long as the children are the heroes and winners, I think all of these stories will be a success. However, the fairy stories you speak of, some by the Brothers Grimm, were of their age. They were didactic in their nature in a very tight and strict Lutheran kind of way installing fear and teaching both adults and children that if you erred from the path of righteousness, you would get into serious trouble. Thank goodness they were watered down for modern children to enjoy. Some of the most wonderful fairy stories were handed down by the Victorians, by people like Andrew Lang with his colour fairy books, E. Nesbit, and during the 20th century by C.S. Lewis, Tolkien etc.