Elves have little tolerance for ferrous materials, and particularly forged iron. It's poisonous to them in the same way that heavy metals are poisonous to humans. Iron is debilitating, physically and mentally. It may even be that it's debilitating, spiritually, as well. Elves must avoid places with high concentrations of iron, like the aptly named Iron Coast. There are even some regions of Ore with sufficient iron that the water is undrinkable by elves. This is, in part why Ur-Hadad was one of the bastions of elven culture, before Man's rebellion and eventual triumph. Much of the land there is relatively low in iron content, though no place on Ore is totally free of iron. It was the least of the evils.
So, for the Elves of Ore, dealing with this peculiar relationship with iron has challenged their artisans for as long as elves have inhabited Ore. They have learned to cultivate and spin spider silk into thread so fine that their clothing is nearly impermeable. They have labored long to find means of purifying air and water. They have developed amazing means of sealing their enclaves off, using both arcane power and mechanical inventions. Their healers have tried, though largely unsuccessfully, to create means of leaching iron from tainted elves' blood and tissues. To put a point on it, elven industry is uncommonly fixated on dealing with the iron problem, and this issue permeates the work of virtually every class of elven artisan, and many an elf has made a glorious name through successful invention of new means of avoiding infection. What they've managed to produce is more a band-aid than a cure, but the various devices, tonics, and raiment they've produced, work.
In many cases, wealthy elven characters look like fremen in still suits (from Dune) or Mass Effect quarians, hidden behind masks and filters, shrouded in folds of peculiarly tailored clothing, and wearing elaborate helms and headdresses or strange devices, which hum and glow with weird energies. These iron countermeasures also are very, very expensive (as expensive as plate mail, or even more so). Thus, elves with the means to buy them tend to be among the most elite of their race. They are long-lived and relatively healthy, avoiding most of the effects of iron (but certainly not all). Poor elves don't fare nearly as well. They are more sickly and the rate of birth defects among them is much, much higher than among wealthier members of their race. The poor also don't live nearly as long, at least if they remain on Ore.
The elves who can afford these countermeasures, though, also look alien to non-elves (and as privileged and uncaring to poor elves). They mark themselves as Other, seal their compounds off from the world and hide behind hermetically seals portals and windows, and otherwise isolate and alienate themselves from the world and its non-elven people. For this reason, any elf character who uses iron countermeasures should apply a penalty of -1 per countermeasure to his or her Personality modifier.
Modeling In-Game Effects of Iron Exposure on Elven Characters
Clearly, though, if I'm going to make this a part of play, I need a simple mechanic for doing so. The easiest thing I can do is to assume that the effects of iron impact character attributes, especially Strength and Stamina, though I think I could make an argument for effects on Agility, Personality, and Intelligence, as well.
Here's what I propose. Iron infection should cause attribute drain, and this effect can occur due to either acute exposure (e.g., being wounded with iron or steel weapons, wearing iron armor, etc.) or chronic exposure (e.g. living on Ore and not using "protection"). Acute exposure is relatively easy to track. Chronic exposure is a bit more difficult, and would require something to be tracked long term. If the mechanic is too granular it just becomes a pain to use, so I think a more abstract means is better. So, how about this?
Effects of Chronic Iron Exposure
At the beginning of each new adventure, Elf characters must make a d20 roll. If the roll is less than their character level, then the character must reduce one attribute by 1 point. If the elf in question is protected by the countermeasures discussed above, he or she may reduce the target number by 1 for each countermeasure used (up to 3). Failure to make the roll results in attribute drain of 1 point. The affected attribute could be at the option of player or Judge, or it could be rolled randomly. Luck is not affected by iron exposure, but an elf may burn 1 point of Luck to avoid the effects of a failed roll.
Example: Cresto the Elf is at level 3. Before starting a new adventure, he must roll a d20 and get a score of 3 or more. If Cresto rolls a 1 or 2, he must reduce one of his attributes by 1. He rolls a d5, getting a 2. Cresto loses 1 point of ... (*rolls randomly*)... Agility, permanently.
Effects of Acute Iron Exposure
Given the nature of the game, characters are going to get wounded a lot. Just to make this a bit more fair and simple for elven characters, acute iron exposure only occurs when they are reduced to zero hit points as a direct result of being hit with an iron or steel weapon (or trap, or whatever). That is, if the character is wounded during combat with an iron or steel weapon, and by that strike is reduced to 0 hit points, he or she must make a check just as for chronic iron exposure.
Example: Cresto (3rd level elf) is already wounded (down to 4 hit points). The fearsome Octo-man swings an axe (steel), inflicting 5 damage. Cresto goes down. After the fight, his companions attempt to "recover the body" (as per DCCRPG Rules, p. 93), and the Luck check is successful. Cresto is alive. He loses 1 point of Strength, Agility, or Stamina, as per the rules, but then must also roll a check to avoid the effects of iron exposure. He rolls a 7, which is equal to or higher than his character level. He avoids additional effects (this time). If he had failed, he would roll a d5 to determine which attribute is affected and subtract 1 point from that attribute.
Optional (Hardcore mode): Elves struck with iron weapons take an extra point of damage.
Long-term Impact on Elven Characters
Over the long term, as elves reach higher levels, the chances of debilitation increase. I think this is a simple way to measure the passage of time and how it increases chronic effects. It also makes elven characters a bit less durable over the long term, unless the elf in question takes measures to address the effects accrued. I think this could be done in any number of ways, most of which reduce to the best rule: "If you want it, then quest for it." A good mechanic also should be productive of better stories, after all, and should have a real impact on the characters and the game world. I think what I've offered here can achieve those things.