While I imagine the appearance of this fey-blooded race to vary greatly, they may vary in size, too --In mechanical terms, what would decide whether one had generated a large or a small halfling would be, above all, strength size (the idea of a standard halfling getting a strength bonus has always stretched believability for me, certainly any modifier over +1). Higher strength scores would indicate a larger halfling, descended from the more brutish creatures of faerie. The idea behind this is that the interaction of fey blood with human in the case of the beautiful races has the quirk of producing smaller half-humans, while the larger or uglier fey blood produces a hybrid vigor that gives a game equivalent to half-orcs. All this while sticking with the core four racial choices.
Goblinoids, Trolls (Hags, if they have them in your game)
This is where I begin to question keeping the mechanics of the halfling for larger creatures. The GM may want to come up with flavorful replacements for the dodging, hiding, and missile accuracy mechanics for the larger halflings, although, with a little thought, there could be reasons why they get the same bonuses other than size (they exude a slippery skin oil, have some subtle, protean ability that doesn't utterly change their appearance but distorts their physical form enough to allow escape, their skin color lends them natural camouflage in certain environments, etc.) This version of the race could be used to satisfy the desires of players who like the appearance options that half-orcs or even tieflings offer in the the Advanced form of the game (and its descendant) and. One thing I can tell right away: using my idea of a racial primary attribute (and accompanying bonus) that I briefly introduced in my card generation method, I would switch the primary attribute for this line of fey halfling from Dexterity to Strength.
The simple solution is to have halflings breed true: they seek out others of mixed heritage, perhaps as a result of feeling rejection or difference from the community of their mother, and settle with like outside of a human or fey community. Over time, the commerce between humanity and faerie would result in a significant enough population that they would come to be, in practical terms, a virtual race. Location vis-à-vis populations of different kinds of fey creatures would determine whether a halfling community was predominantly small halflings, larger halflings, or composed of both sizes.
Happy world-building until the next Mythopoeic Monday!
*For one way to help the plight of one pygmy people, the Batwa of Uganda, I recommend the Kellermann Foundation.