A) Has that ever been done?
Sure. With few exceptions, faerie tales are about character and the individual, so they end up being more amenable to RPG and skirmish mini games.
B) If so, which particular stories are the best ones to do as a game?
A few Northern European troll/dwarf battles, but mostly Japanese oni and associated legions of demons.
C) Which rules did you use? Or RPG rules?
QILS
D) Which figures?
I have tons of 28mm fantasy figures that work in this genre, along with a number of conversions.
E) What terrain?
Usual forest and village stuff. I do have a mushroom village that works for conflicts within faerie like species.
F) Were the other players kids, adults or a mix?
Done both kid scenarios and adult ones.
G) Did it turn out to be a fun game?
I think so.
H) Got any other tips or suggestions for other gamers?
The essence of the faerie tale is about the individual and often about transformation of the individual. It is OK to have a large number of fantastic elements for creating atmosphere, but there should be one fantastic element that is core to the conflict, and thus the victory conditions.
The Quest (externally imposed or internal) is a simple element for this. Likewise, the segmented objective (bring me these elements three and of the curse you will be free) is pretty straightforward to integrate into a minis game.
Beyond that, innovation on the part of the "hero" is always a key element of faerie tales. This separates them from odysseys or, more crudely, "hack and slash" adventures. This is extremely difficult to do in a game without referee or players willing to let the flow drive the action.