I'm not the best lore buff out there, so I have a question regarding the distinction between humans and elves within the ES universe.

As I understand it, humans and elves are both decended from the Ehlnofey, Et'ada too depleted from the creation of Mundus to return to Aethereus. These Ehlnofey procreated to continue their existance, and through decent became humans and elves. Those Ehlnofey who "wandered" in Yokuda, Akavir, and Atmora became humans, and those who "settled" in Tamriel became elves.

Mostly true, just slightly more complicated. Some of the Ehlnofey that stayed on Tamriel became men (the Nedic tribes), and some that went abroad became Aldmer (Left-hand elves, etc.)