So it's bit like Tolkien Elves but also Evil Stalinist Vedic India right?
(TBH how does it works after yer great Cataclysm that killed 99% of living beings around - are Elves just reincarnated and dominated the world by sheer numbers?
It works primarily in that the elves were only pulled into the Mortal World BY the Cataclysm. It literally ripped the barriers between life and death apart and dragged a number of the elves from their astral paradises into the Mortal World. Because of their nature as spirits created by the astral gods, the number of spirits that exist in the Mortal World was fixed by the number who were initially trapped in it. The Elven population can never grow past that number and the only way for a new elf to be born is for another to die (at which point its soul moves to the womb of an elf of the appropriate caste).
This is why they hunt their heretics so incessantly; every one who abandons their place in the caste hierarchy is one that cannot be replaced. The only way to do so is either convince the Dark elf to repent and return to their place or to execute them so their soul will be reborn within elven society. If enough escape, the souls of fallen elves may even be born among the Dark Elves, robbing their divinely ordered society of even greater numbers.
That the primary focus of the hierarchy is ensuring that the elven priest-kings live in the same luxury they did in their astral paradises (where divine power alone enabled food, drink and every luxury imaginable to appear at a whim); every elf of the lower castes who abandons their place makes maintaining the façade that much harder and so causes the upper castes to make those of the lower castes who remain to work ever harder (which in turn causes even more to attempt to flee).
So, while the elves started the immediate aftermath of the Cataclysm in a commanding situation (in the setting's starting region they numbered 60,000 to the few thousand scattered humans), the two centuries since has seen their situation ever deteriorating as the human populations grow and more elves abandon their castes.
Basically, they're doomed and their leadership is ever more desperate to maintain the status quo which is what makes the kingdom of El-Phara so dangerous and why in the GM's Guide section on the default region they are described as a hostile realm (El-Phara translates to "The Place of The People". Their endonym for themselves is El... The People. The terms Elf and Elven are human contractions of El-Pharan, i.e. people from El-Phara).
I'd definitely not go so grimdark.
It's only really the elves whose religion is grimdark. Even the orcish religion isn't as grim. Only demon worship earns you a bleaker fate than the faith of the Elven Court (which, if it has an upside, is that worship of the Elven Court is forbidden to non-elves... non-elves aren't even worthy of worshipping the true gods; they are inferior beings condemned to eventual death by their very natures).
The Big Good of religions in the setting is the Old Faith that worships The Source and whose beliefs can be summed up with one of their common professions of faith...
“You are all the beloved children of The Source. Love one another. The world is a gift from your loving Creator. Care for it as you would a treasured heirloom.” Their view of the afterlife is that all who are faithful will return to and be embraced by The Source as His beloved children and heirs. That said, the Old Faith has been unpopular and even persecuted since the fall of The First Empire to its Beastmen slaves and their astral gods.
When their slaves rose up against them, their prayers to The Source went unanswered. Rather than blame themselves for committing grave sins against The Source by enslaving sapient beings, they blamed The Source for not saving them from the consequences and turned to the worship of the gods of the Beastmen who defeated them and eventually split off their own variant of that, the Via Praetorum. Only various remnant groups, mostly barbarian tribes who had abandoned The First Empire because of its many sins, still practice the Old Faith today; though in the wake of the Cataclysm it has been on the rise as human memories are short, the gods of the Via Praetorum failed utterly in the face of the Cataclysm and followers of the Old Faith escaped many of the Cataclysm's horrors that consumed so many others.
The runner-up in the good religions category is the Via Praetorum which is Roman-themed and teaches that right living will earn everyone who is faithful a place in Paradise, but still holds that the position you have in Paradise will be in line with your place in life (i.e. a peasant will still be a peasant, but the soil will always be rich, the weather always fair, the roof never leaks and the crops always abundant and easy to harvest). The orcish religion is actually a variant of the Via Praetorum with the main negative being that because they enslave anyone who isn't an orc the "Paradise in line with your place in life" translates to "if you're not an orc, you'll be a well treated slave in the afterlife."