I like the world but I'm going to make some editorial notes. First being in the original hook you gave to Danny and I. You said we were experienced men at arms more or less, but if we are starting at clvl 1 that is incongruous. So from that point I would say we are just starting in the service of Alden. That seems like a minor fix seeing as though we have to embark on only a clvl 1 type quest, if you want us to be more important to our liege Alden I suggest that we aren't experienced but more valued for our potential.
As far as Danny's character is concerned my suggestion as to how to handle it goes as such: If you allow the elves as a remnant of the old civilization then only local populations would truly know they exist. Danny already said in his background that his wood elf mother's people were a secluded people and that Elijah feels akin to them and so forth. It would make sense to me that Elijah can pass as a human for the most part and doesn't reveal to the general populous what his heritage is (I'd like to know your thoughts on that Danny).
Now I am going to talk rules about my character. I know you are giving us a free +1lvl adjustment but I feel bad taking it if Danny isn't. I am assuming that the Stahlmen are a mountinous group akin to the Goliaths, as such I wouldn't mind being a human with the racial traits of a Goliath. I wouldn't take the stat adjustments or the Powerful Build trait but I would take the rest. If you think it is fair to take Powerful Build I will, but I will refuse to take the stat adjustment unless Danny gets a similar bonus to something. Also, if we are truly starting at clvl 1 then I will change my age to match the backtrack I feel is appropriate for my character starting service with Alden, which is around 16-18 years of age.
The last simple point I want to make is that my earlier point about our clvl and how it affects our status in the world matters to how much wealth we have. Both Elijah and Dracken come from somewhat impoverished backgrounds.