Elf house on a tree! That would be cute in the garden, especially in the tree over grown with ivy. How about some battery tea lights in the windows during outdoor parties. I hear the fairies/elves whispering "home school project" in my ear.
Try using doll house accessories to make a fairy tree- This one looks a bit over done to me but it is all in the eye of the beholder. Be careful when attaching to the tree and don't cause too much bark damage or you will get rot-not good for a tree.