Following on Part I.
One vital consideration for the masquerade of the magical creatures is how tight it is. There is a range of course, and the further ends cease to really be a fantasy in the modern world, but the range is vast.
Sometimes there are those who are in the masquerade and those who know nothing, and the masquerade is tight. Sometimes there is a middle range of people who know something, but are not in the masquerade, often with a range of such people who know basically everything to some who are aware there's something strange but little more.
Harry Potter has a very tight masquerade. Everything is papered over. The Muggles who know are basically the immediate family members of the Muggle-born wizards. It comes as a shock to the Prime Minister when their existence is revealed. This is driven, to be sure, by blatant and widespread use of spells to destroy memories of their existence.
Monster Hunter International has a reasonably loose masquerade. The monsters are known to thousands of government bureaucrats, their contractors, and many elected officials. One character testifies before a Congressional committee about vampires -- not whether they existed, but how they should be treated. In one area, those bureaucrats favor running wild stories in tabloids over suppressing the information. Enough blatantly false stories, and the true ones will be lost in the mix. Still, many people who live, own homes, buy groceries, and work in mundane manners know clearly about the magic.
It is possible to do looser than that. I have read urban fantasies where connecting to the magical is a matter of having a friend of a friend. Then, that starts to shade into overt magic in the world.
It is even possible to do tighter than Harry Potter, but then you must deal exclusively with people on the other side, and no one passes through the masquerade. It loses all the advantages of a newbie to introduce things, for one, and it limits the plots for another.
A tight masquerade often effectively functions as a portal fantasy. The mundane character leaves the rest of the mundane world and enters a new and fantastic one. (Did Alice pass through a portal to the underworld, and later the mirror world? Or do these elements of our world lurk under rabbit holes and behind mirrors, and delude any children who stumble in into thinking it was a dream world?)
The necessary elements of this are the relentless pursuit of any escaping knowledge, and its suppression. Tight masquerades often require erasure of memory, or removing those who have learned secrets one way or another.
Though they also often do a good job of physically isolating those who are under the masquerade. Illusions, spells to distract, and spells to conceal can be applied thickly in settled areas. It is hard to just stumble on these sorts of masquerades.
Well, except for the protagonist. The plot device of having the hero stumble in is age-old.
One prudent thing to consider is how accurate the knowledge is on the mundane side of things. A tight masquerade would leave it free to mutate.
An important question may be when the masquerade came into effect, and whether it was tightened up, and when. The fae frolicked, with some precautions, among those foolish mortals, until, say, the Renaissance saw a burst of accusations that they were devils, and witches trafficked with them, and so they withdrew more sharply.
That would explain why winged fairies -- unknown until modern times, and smaller than the vast majority of those in folklore -- emerged. Cut off from the source of knowledge, people's imaginations ran wild. That is, if such rascals as Robin Goodfellow didn't get the ball rolling by, say, suggesting the more innocuous fairies of A Midsummer's Night Dream.
The loose masquerade can give the mundanes more reasonable knowledge but doesn't have to be any more pleasantly maintained. Kill the monsters, lie about the causes, intimidate the witnesses. Destroying memories and having witnesses disappear are also possible here, but as long as the tales are incoherent, the masquerade remains more or less intact.
In this masquerade, it is not unknown for people to secretly spread sound knowledge (to enable surprised people to fight) in the form of fiction, even while others have, as their jobs, the task of generating tabloid stories of manifest absurdities with just enough resemblance to tar the true tales. (Would the Robin Goodfellow suggestion above be part of an old, loose masquerade, and they tightened up subsequently?)
A loose masquerade does make it vastly easier for the protagonist to penetrate the masquerade, and then to move back and forth between the mundane and the magical, and for the plot to involve the interaction of the worlds.
As with having the masquerade itself, how tight or loose the masquerade is will determine many things about the world and so the character and plot.
I like the suggestion that Shakespeare was, courtesy of 'Midsummer Night's Dream', part of an Elizabethan black ops campaign to obfuscate the truth about the Fae for whatever reasons.