Yes, Tyrande killed a paladin of the Silver Hand -- in cold blood, without asking questions, without trying to determine why he or the settlement he'd been entrusted to lead were there. Shortly after killing him, a small army of undead swarmed into the settlement, attacking orcs, humans, night elves and whatever else they could get their hands on. Tyrande hastily beat a retreat with the Sentinels under her command and hoping that Shandris and the Shadowleaves were all right. But the undead followed the night elves tirelessly, until they caught up with them and their leader was revealed: Archimonde, left hand of Sargeras and one of the first lieutenants of the Burning Legion. Archimonde had been banished back to the Twisting Nether way back during the War of the Ancients, and he was none too happy about that.
Tyrande managed to escape, though many of her Sentinels were slaughtered by Archimonde, and left Shandris in charge of guarding the forests while she left on a more important mission. It was time to wake up Malfurion and the druids and get their help, because this enemy was far too great for Tyrande and the Sentinels to face alone. She succeeded in waking him, and together they traveled and woke the other druids. But while searching through the Barrow Deeps beneath Hyjal to find the sleeping Druids of the Claw, they discovered something both of them had forgotten about -- the door to the prison that Illidan had been sent to so many thousands of years before. Tyrande suggested they free him, perhaps reminded of what Illidan had said to Malfurion just before his imprisonment, that the elves would need arcane magic, in case the Burning Legion ever returned. Malfurion didn't agree and forbid Tyrande from freeing Illidan.
Or tried to. The thing about Tyrande Whisperwind is that despite her compassion, her devotion to Elune and the priesthood and her supposed "gentle" nature, the absolute last thing you ever want to do is make her angry. At this point, she'd finally been reunited with the man she loved, a man who had turned away from her and deserted her in order to (by all appearances) sleep the centuries away. Rather than show any kind of contrition for his actions, Malfurion had simply stepped up and tried to take a dominant leading role from a woman who'd been doing this for centuries. Not only that, but he tried to forbid this woman from doing something that was by all rights extremely logical to her.
Given this, it's a wonder she even bothered going back for him after she bid him a curt farewell and left to go free Illidan anyway, enraged that Malfurion would have the sheer temerity to forbid her anything. She and the Sentinels that followed her systematically fought their way through the Barrow Deeps, killing her people, the night elves that had been ordered to stand guard, in order to get to him. After freeing him, she begged him to come back and help his people -- and Illidan, who was still besotted with Tyrande after all these centuries, agreed. He left to fight the demons of Felwood, in the process running into Arthas. After a short battle that resulted in a draw, he listened as Arthas told him of the Skull of Gul'dan, a demonic artifact that was responsible for corrupting Felwood. Illidan fought his way to the Skull and then, instead of outright destroying the thing, thought twice -- if the Skull was so powerful, perhaps he could use its powers for his own ... and impress Tyrande in the process.
Everyone knows the end of this story -- Illidan transformed into his current demonic appearance, and Tyrande and Malfurion, once again horrified at his actions, banished him from the forests for good. Afterward Malfurion and Tyrande met with Thrall, Jaina and the Prophet, who revealed himself as Medivh and stated that the three races had to work together to defeat the Burning Legion. Though Tyrande was wary of allying with the creatures that had murdered Cenarius, she realized she had little other choice. The rest is history; Malfurion realized the only way to stop Archimonde was by repeating the past and destroying the Well and Nordrassil right along with it.
With the destruction of Nordrassil, Nozdormu's pact was broken and the night elves' immortality was lost. With the Burning Legion defeated, the orcs, humans and night elves parted ways, and Tyrande's people returned to the forests to work on mending the damage done by the Burning Legion.
This is where it all gets tricky. The events just recounted all happened, technically speaking -- but with the War of the Ancients trilogy by Richard A. Knaak, certain events were changed. A human mage named Rhonin was sent to the past along with Krasus, a red dragon who was disguised as an elven mage, and Broxigar, an orc, via a rift in time. The three helped the night elves with the War, and in the process meddled with the timeline -- and that meddling probably changed the events recounted above.
Since Tyrande and Malfurion not only encountered both humans and orcs on this alternate timeline, but helped them and were helped in return, their reactions to the invasion by the human and orc settlements were probably vastly different. Tyrande definitely remembered Broxigar, Rhonin and Krasus; they were all still fresh in her mind during the events of the novel Stormrage, also by Richard A. Knaak. Thus the wariness, the distrust, the implication that humans or paladins were somehow corrupting the forests with their presence and the outright xenophobia she exhibited were theoretically no longer in play.
This is what makes night elves so difficult to discuss; two timelines run concurrently -- the timeline of the Third War as shown in Warcraft III, and another alternate timeline in which the Third War also occurred, but was affected and changed due to Rhonin, Krasus and Broxigar's travels. While the first timeline is all we have to go on, it's this second timeline that is currently affecting the game and politics in general, as far as the night elves are concerned -- and we literally have no record of it. Events were likely much the same, but the attitudes had to have changed -- there's no way that the Tyrande presented in War of the Ancients, the Tyrande that was so gentle and eager to help Broxigar, so grateful to Rhonin and Krasus for their help, would outright slaughter a human and orc settlement.
While it makes it tricky, I'll do my best to trace what happened after in light of the altered timeline. Keep this in mind when I continue with the night elves and their political effect on the Alliance tomorrow.