Okay.
Some names have been withheld to protect those involved, not that any of them have written an Exalted book in years.
This is the tale of how the Fair Folk became the raksha, and why I go into full-body convulsions of laughter when people on RPGnet bemoan how I wrecked the perfectly-calibrated artistry of Graceful Wicked Masques and E:tFF.
I'm a bit of a packrat and social archeologist. I like knowing stuff about my predecessors, their processes, and generally what happened before I came along. So, ever since I got a single toe backstage, I've been collecting outlines, ancient messageboard posts, and minor memoranda having to do with Exalted's design. I mentioned a while back that I have all of Compass: Malfeas in raw draft form; I also have a bunch of 2e Compass and Manual outlines, including GWM, and some other stuff. The crown jewel of my collection, which I only came into possession of a few months ago (October-ish?) is the outline for Exalted: the Fair Folk. I prize Grabowski-artifacts most of all.
I read it and my mind was blown, because it describes something bold and exciting and enticing and not even slightly resembling Exalted: the Fair Folk. The "near-extinct exiles stranded in the house of the Primordials" angle that GWM 2.0 introduced is straight out of Grabowski's outline. Grabowski wanted the Fair Folk to look like a terrifying, alien invading force to the Creation-born, but wanted the experience of playing one to be that of playing exiled nobility in an alien world—cool, mighty, refugees, decimated in number, unable to return home because of the feeding frenzy going on out there in the Wyld.
The outline also called for Fair Folk to only be able to reproduce within Creation at a very slow rate. Boy did that not happen.
Most of all, though, the outline demanded that its writers be magnificent and creative and live up to the standard of Exalted, which is to say, he commanded them to exercise their brilliance and make the raksha weird and unique and not at all like standard eurofae. The eurofae trappings (Fair Folk, Faerieland, stolen Changeling: the Dreaming terms) would be laid over something weird and new and unique to Exalted.
(He also had some choice words about Pooka and Pooka fans.)
Everything past this point is secondhand, so I may have some of the details wrong, but essentially:
So, as will happen with these things, deadlines were tight, the project ran late, and the drafts came in, far too late for a total rewrite of the book, and several of the authors had pretty much ignored Geoff's outline and gave him standard eurofae tropes all over the place. The "the last remnants of a mighty alien race stranded in a foreign world" angle was completely not implemented at all, as you may remember if you ever read the book. Balor was implemented as a completely different character than he was supposed to be.
In a desperate bid to shift the tone of the book toward the exotic, Grabowski tore out the eurofae language completely, and he and Jenna filled the book with hindu mythology and sanskrit terms. Jenna went into overdrive to make the book as exotic and evocative and metaphysically resonant and strange as she could within her sections—the brilliance and failure of Exalted: the Fair Folk is largely the result of Grabowski and Rebecca Borgstrom performing triage on a compound clusterfuck with NO time remaining before final deadlines, basically. This is the point where Faerieland became Rakshastan, and the Fair Folk became raksha.
Through no fault of their own, the 2e guys then went into the resulting mess with the mandate to make it more approachable, not armed with any of this background knowledge, and gave it a straight facelift. I believe I'm the only person who's worked on Fair Folk in second edition with a complete record of their concept history across both editions.