The mythology is that there were two gods: Solus and Luna (boring sun and moon gods, yes) who had four daughters: Pyra, Aqua, Terra, and Zephyra (The four elements). Solus and his daughters began to dote upon a pocket of reality they discovered, creating what is currently considered faeire. In an ultimate act of creation, Solus and his four daughters create all manners of species to inhabit their realm. To govern over all the others, they create the Courts, and most importantly, Fae proper. Luna, being lonely, hooks up with Estrel, the Star God. They create humans, which they hide in a neighboring dimension, using their power to create a powerful barrier between the two realms. Solus discovers this and flips. Pyra and Terra are furious as well. Aqua and Zephyra defend Luna, feeling guilty for ignoring her.
This inevitably leads to a massive war in Faerie - the courts of Spring and Summer against Fall and Winter. The gods even step in, giving it all they've got. Eventually, for some unknown reason, all the gods fall asleep. However, there's still damage. Parts of the realms have been fused together in bizarre bridges of reality, while other portions of the barrier wax and wane across the seasons. Fae initially try to conquer the other realm, but discover a major setback - names. The gods had named them to control them, but as the creations, they found little power within them. The Humans, however, were children of a different set of gods, and being resourceful, quickly used them to beat back the Fae.
There's more stuff, but I'm here mainly to talk about balancing. I want to put together a true name system. This is what I have.
Fae Template:
+2 to Any one Stat - Fae beings are more refined than natural equivalents.
Fae Step Encounter Ability
Name of Power: Once this creature is bloodied, any nonfae creature may spend a minor action to make an Intelligence Attack against this creature's Current HP. If successful, the Fae gains -2 to all stats until the end of the encounter.
This is designed for creatures and not players. I'm worried about balance issues here: is it too powerful or too meh?
Simplicity in the name system seems like a good place to start. How about something that seems a little more... in line with your campaign mythos?
Name of Power (minor; 1/encounter; reliable; while the fae is bloodied) A humanoid foe can make an Intelligence vs. Will attack against the fae. If the foe is trained in Arcana, Religion, or Nature, they gain a +2 to the attack roll. If the attack succeeds, the fae takes damage equal to 1/4 (surge value) of their hit points.
Trying to go for something that hints at the mortal/human effect, and making it so that you could envision if you got a faerie bloodied, they'd have to run or else risk being crippled by the true name power.
Bloody a fae and make your intelligence attack to name its kind. If the attack is successful, the fae suffers -2 to all defenses and is dazed until the end of the attacker's next turn. Should only be possible once on a given fae.
But if you know the fae's personal name (Bob Perkins, Angie Douvall, etc) you can really put the hurt on him. Bloody him and attack with that personal name and he's stunned for a round and dazed for the rest of the encounter or something.
That way, like Dark Templar says, the Fae are powerful but fragile and likely run when bloodied, plus it gives your players something fun to research when they know who their foe will be.
There are other traditional fae weaknesses, too, like cold iron and salt. In my game faeries cannot cross a line of salt (salt is about as expensive as gold, though, since it's mined) and if they're carrying cold iron they lose their powers. Wounding a faerie with cold iron hasn't come up yet, but I might give them a vulnerability to cold iron if they don't already have one.