I just finished rereading Donna Gillespie's The Lightbearer. It's about a heroine from a Germanic tribe, called the Chats. Now, it's a work of fiction, but supposedly Donna Gillespie researched this stuff for 7 years to make a grand book on it. In it, as a baby, she has a sword in her crib, as supposedly iron cuts magic. And, she was prophesized as a baby to become a priestess, something her mother wanted to avoid. Also, when one of their holy women visits their home, they have to dig up the iron blade they keep buried under the threshold for protection, as the women cannot pass over it. Later, when the heroine is brought to a sacred Island, she's required to leave all her weapons and iron behind as it disrupts the work that is done there.
I just have to thank you for mentioning that book. I read it a few years ago, and really liked it, but lost it in a move, and couldn't remember the author's name to find it again. Now I have the author's name so I can find it again, and this makes me quite happy.
As to the original discussion, I always figured the aversion to iron was sort of like an aversion to man-made things, of which iron is a good representation, given the fae were nature creatures. But I have
absolutely nothing to back that up.