There are two ways to attack the subject at the heart of your excellent question: by using early medieval primary sources (which are always too rare) and by considering early modern folklore collected in the North Sea area and projecting backwards (which has its own problems). At the heart of the problem with projecting backwards using early modern sources is that folklore is not monolithic, by its nature. Folk traditions, beliefs, and the narratives that express those beliefs are subject to change because there is no single dogmatic doctrine that provides an anchor from which the tradition cannot drift. Similarly, it is too easy - and error ridden - to generalize about traditions using rare early-medieval sources. The two types of evidence provide glimpses at a tradition in motion, and yet, they do point to some observations.
There is a reasonably homogeneous tradition of supernatural beings, which people believed lived in family groups and/or communities and which is documented in historic and pre-modern professional collections, ranging from wherever Scandinavian languages are spoken, Britain, Ireland, nearby islands, and Brittany. Because this generic tradition (acknowledging enormous variation over time and geography and also a wide variety of terms for the entities) is so widespread and appears in some of the oldest documents from the area, so that it is reasonable to conclude that the roots of the tradition is pre-conversion.
At the same time, it seems inevitable that conversion affected the tradition and shaped it over time. That said, the Church appears to have failed at the one thing it strived to achieve - namely, to group these supernatural beings together with the forces of evil. We see evidence of this effort in the passage in the Anglo-Saxon poem, Beowulf, when the poet writes that elves, like the monster Grendel, were descendants of Cain:
From him the evil brood were all born,
Giants and elves and evil spirits,
And also the giants who fought against God
For a long time; He paid them retribution for that.
That clerical point of view did not generally affect the folk tradition, which maintained that the elves (fairies, sidhe, pixies, hidden folk, or other names) were neither good nor evil. Mind you, people feared them, for they were extraordinarily dangerous and were capable of inflicting terrible harm, not the least of which was abduction, which could last for eternity and deprive the poor soul of salvation. The elves had to be treated with caution, respect, and deference, and most of all, they needed to be avoided. But they were not in league with Satan - that was a different kettle of supernatural beings.
In pre-modern collections from North Sea cultures, we find numerous explanations of the origin of the elves (with all their names), some of which are placed in a Biblical context: the elves were angels who refused to take a side in the battle between God and Satan, so they were cast out of heaven to live on earth (but not Hell) apart from the Christian struggle between good and evil; or the elves were the children of Eve who, when she realized God was coming for a visit, was only able to clean some of her children, and so she hid the others, and God answered that those who were hidden from Him would be hidden from mankind for all time. At the same time, there is a widespread legend that tells of the possible salvation of the elves: a young man is traveling through the forest and sees the elves celebrating, so he calls out and says that they have no reason to celebrate since they cannot know salvation, at which point the elves begin to cry. He goes home and tells his father what happened, and his father tells him to return with word that they will know salvation, which the boy does, and the elves resume their party. Some times the boy tells them that they have no more chance at salvation than does his walking stick have a chance to sprout leaves. The next morning the walking stick is full of leaves, and so the boy goes back and tells the elves the news.
The repeated message in these stories is that the elves are not evil, and that if they lean in one direction or the other, it is on the side of salvation. The Church, however, persisted in its attempt to say that all supernatural beings not specifically identified as being on God's side in the bible are by necessity on the side of evil - maintaining a strict division of the universe into those two halves. During the witch trials, for example, people could be accused of cavorting with the elves, with the consequence being the same as cavorting the demons. Despite that dark chapter in folk belief, the folk persisted in seeing the elves as theologically neutral, and while they were to be feared, there were also stories of these supernatural beings rewarding people of good character and generosity.
That leaves us with the odd tradition of incorporating the word "Aelf" into Anglo-Saxon names - Alfred, being one of the more common that descends to this time. There can be no question that people understood the meaning of these names, but that does not mean that they took them to mean that in a literal way. We have names including Rose and Marigold, but that doesn't mean that we automatically think of those flowers when we encounter those people. I knew a fellow named, of all things, Rex King (parents with a sense of humor or a lack of imagination!), and all his schoolmates no doubt understood that Rex meant king, but we didn't think along those terms when we encountered him - or at least I didn't.
It has always struck me as odd that the Anglo-Saxon people might be summoning dangerous supernatural beings with a name that uses their name, but we have to set that aside as something that apparently cannot be resolved, and we must merely accept the fact that the Anglo-Saxon naming tradition included this word, and people did not think of it as taunting the dangerous supernatural beings.
edit: Thanks for the anonymous gilding of the answer - and for the platinum! Much appreciated!