Some settled on the Hebridean Islands, others off the Irish Coast. A small group settled in the Glastonbury marshes, another in the Lake District of England, another on Anglesey.
Each of these places became Fairy Lands, to be feared by the aboriginal natives and the Celts who followed. The Fairy Folk used magic to raise mists and hide their villages, they also summoned demons and beasts to guard themselves, giving rise to stories of dragons and worse. Most died out through inbreeding, but some survived long enough to affect the Age of Arthur.
Those at Glastonbury became the rulers of Avalon, a Fairy Isle. The Lady of the Lake was a descendant living in the Lake District. Arthur was descended from the Fairy Folk and Merlin was half-fairy himself.
The Fairy Folk should be powerful, but not over-powerful. In the main, these are not Atlanteans themselves, but their descendants over thousands of years. They should represent the dying and decaying remnants of a dead civilisation. All they have is half forgotten legends and delusions of grandeur. Pity them.