...yet they're the ultimate failures. They see all their works come to naught, and they themselves are doomed to fade away. That's kind of the point.
This is a pretty standard trope with them these days, too, and I think the Forgotten Realms perhaps goes the farthest to incorporate a similar theme, with the Retreat. The Altmer in TES suffer from this as well, although they are far more hellbent on the "do something about it" part, and it remains to be seen where they are headed; the MMO certainly didn't capture them all that well. What I do like about the LOTR elves (and Altmer) is their basis on what are, more or less, angelic beings. They also mirror many of the flaws (and virtues) of these beings. I guess I see Gromnir's point with regard to "perfection" making them ill-suited to being a playable race, however I still enjoy seeing them as superior in some significant aspects, with some concomitant flaws. I just loathe the "fated to vanish and die" theme. I'd rather see them as more embedded in the world, and eager to prosper within it. Longevity may change one's perspective but it is all too common to see RPGs translate this into an inability to adapt to changing circumstances. Mind, dwarves are often painted with the same flaw, but the "fated to vanish" theme is often omitted, with the notable exception of the Dwemer, who are dwarves in name alone.
Personally, I like the notion of giving the race a "higher" caste of ancestors, and making the playable ones a bit more "down to earth" or at least invested in and capable of prolonging their presence on the homeworld, leaving it open to the writer if they wish to use the former as a tragic tale of extinction.
I think, in spite of its flaws, WC managed to do a pretty decent job with re-energising the race. Particularly with the Scourge attack on the sin'dorei breaking them out of the aeons they spent ensuring they remained hidden from the Legion, becoming one of the most dynamic elf races out there, in terms of how much they do to ensure their survival. They remain one of my favourite renditions of the race, particularly how Blizzard made an effort to exaggerate their visuals. Maybe a single player RPG, like this one, that focuses more on the Fae mythos for the elves would be refreshing. Amalur did try, albeit not with the elves per se. I need to get around to finishing that game at some stage.
All this reminds me that I need to re-watch LOTR and see the newest movies at some point, and read the books in the future. I read the Silmarillion when I was 15 but it's all faded into oblivion since then... along with the Earthsea Quartet, Cycle of the Eternal Champion, GoT etc etc... there just isn't enough time in this world.