I'm working on several adventures for my PKs, but in trying to create encounters with faerie in them (especially unseelie) I find myself unsure of how to use fey without losing the mystery they possess in Pendragon.

I've been using descriptions of fog, "unnatural darkness," "unnatural chilly air," and other things to make it clear these ogres, goblins, etc, are not mundane, but my players seem to default to a sort of dungeon delving attitude toward anything supernatural.

Without killing them off (which I fear will only make them run at the first sight of faerie) how do I establish proper setting? How much faerie is so much that it becomes mundane?

Faeries are like trust; the less you use, the farther you go. :P

Now, I don't claim I use Faerie any better than you do, but some ideas that come to mind, which all are variants of 'Don't make them mundane'.

1. Special times & places:
- Don't let your Faeries to be encountered willy nilly. It should be a special time and/or a special place. The encounter should have meaning (of sorts). Now, it depends on how common your Faerie are. The more common they are, the more mundane they will feel. Can't be helped. However, you can establish that this particular patch of forest is serious bad mojo; go in and the chances are, you will regret it.
- Special times would of course be the Celtic festivals. Especially Samhain (All Hallows' Eve) is very good for a Wild Hunt type of thing... All the peasants lock up and stay awake the night. The wind howls... or is that baying of wolves? Doors rattle, testing if they are locked... And people might disappear. You DO NOT go out when the Wild Hunt is in progress. If one of the PKs decides to go out, tell the player that if his charatcre does that, he is dead. No roll of dice. Does he still want to do that? Fine. Roll a new character. This one disappeared into the night and is never heard from again.

2. Special powers
- Don't make it about combat. A big ogre with a dull look and a club makes every hack&slasher smirk. Don't have a horde of goblins. Have one goblin, who is carrying a bronze pole (which is so heavy that a PK can barely lift it) around effortlessly. He is also fast, as in: 'You hit him? He dodged, you missed, and are now on your ass with a couple of cracked ribs. Take 6 points of damage.' The Goblin mocks them and tells them that they are now trapped in his part of the forest. He vanishes into the bushes, but when the knights try to leave, no matter which way they go, they always end up on the same place. With the Goblin mocking them all the while. Maybe he even starts to sing a little ditty about branches and thorns, crows pecking eyes, etc... And of course the bushes start looking distinctly thorny, and there is caw caw as a murder of crows lands on nearby treebranches, staring at the knights intently. Ominously waiting. Trained warhorses become as skittish as foals. The PKs are in a bind. (Religion & Faerie lore rolls for some hints from GM.) Unless one of them crosses himself or prays for God/Jesus/Mary/Saints (Pious roll?). Or a pagan might be able to call on his own deities (again, Pious roll?), and that is enough to break the Goblin's wicked spell, allowing them to escape... For now, with the Goblin hurling curses behind them, promising that next time he will make flutes out of their bones or some such. And maybe next Samhain, there is someone prowling in the manor grounds, looking for a way to have his revenge... lets hope that the PKs have been smart enough to have a priest bless the place with holy water or are applying some folk remedies (horseshoes over the doors, that sort of thing). Which then means that the Goblin will let out a piercing howl as he is thwarted yet again. (Alternatively to the praying scenario, they might be able to trick the Goblin somehow. Faeries like wagering and playing games, so something along those lines might work. Might be that the Goblin's power is in the bronze pole... getting him to let go of it by challenging him to a contest about harp playing might work. Basically, anything your players might come up with other than combat might be the solution.)

With any luck, your players will never again have the mental image of Goblin = 1HD weak monster. :)

By the way, my players are starting to be darned paranoid every time they meet Faerie creatures that they might be 'losing time'. They already know that the time passes differently in Faerie. Usual rules might not apply. A day might be a month. A month might be an hour. They never know until they get out again!

Concur. A nice memorable encounter with faerie creatures of some sort can get folk thinking twice about what they're engaging.

In the one group it was Black Dogs.

Set of them are encountered on a road in Anglia during dusk. One per knight.

Knights are in "one rabbit stew coming up" mode - it's only big dogs. With glowing red eyes.

First knight wins opposed roll and hits dog for 17 points. And takes 17 points damage to himself without apparently harming the dog. Armor doesn't count.

Second knight wins opposed roll and hits dog for 17 points. And takes 17 points damage to himself without apparently harming the dog. Armor doesn't count.

Third knight loses opposed roll. Dog rolls 3d6 for 17 points. And that knight takes 17 points of damage that armor did not effect.

Knights pass Prudent checks and flee. Some weeks spent healing up from heavy/major wounds.

Knights also treat large black dogs with respect thereafter. It's also a game story that I have heard repeated by the players years after that game broke up.

Then again, I'm also the one who has a kingdom of frog knights who ride turtles hidden away in a pond somewhere.

Both earlier answers here are excellent. In my humble opinion, though, the creatures of the faerie realms (including the realm itself) is something that is always testing the human natural perception of the surrounding world. Either they/it are/is actively doing it, or their innate, passive abilities are somehow affecting everything around them including the player knights.

And that is what's so special with them. Think of what this does to players who are used to lash out at just about anything with their characters. In a D&D game for instance, just because a character meets a brutal ogre king doesn't mean the whole fabric of existence gets wavery and hard to focus on. So, therefore, the warrior PC can plan how to attack the ogre king, doubly so if he's read up on the stats of his enemy (which is often the case with munchkin/power-gaming players).

But in Pendragon, you being the GM of this world, can make the very ground the player characters are standing upon into a faerie pond, or woods full of faerie fire - just to make the players laid back attitude of "we-trust-in-basic-physical-laws-to-aid-us" vanish in a second. And THEN throw some other uncontrollable effect at them coming from the creature(s) itself, and by that making the players roll on certain traits so their characters can act calmly at all. There's so many variables built into this game that can be used against the characters. They should never be at ease in the presence of a faerie creature!

The best thing in a Pendragon game is that when dealing with magic or faerie you do not have to explain how it happens, only that it happens. There are no rules. So it is up to the GM to tell what happens. And as with these kind of things. anything can happen. Small goblins with the strength of a giant. Gentle giants who only want to eat apple pie. Strange faerie knights that challenge the knights to a duel with the harp. A castle where the highest honor is to sleep with the pigs. Places where you need to kiss 30 trees before you are allowed to leave.

With faerie it is not your death that is the most frightening thing that could happen. It is the loss of your sanity that is far more dangerous.