Setting developments

Magic and steam technology are mutually inclusive
"The two feed off of each other and can not exist independently." This suggestion stumped me for a while. How could magic not exist without steam technology if steam technology is new and magic existed long before it? I just couldn't wrap my brain around it. Thank you, Plague, for coming up with an answer.

Deep underground, there's a steam magic machine that powers magic [we so need a different name for it though. Any ideas? And where did this thing come from anyway?]. It creates this special kind of steam that has mixed with the atmosphere [should we still call it steam or something else?]. People pull the steam from the atmosphere to fuel their magic. This steam also powers steam technology.

• At one point, both magic and steam technology existed in the surface world, but for whatever reason [ideas?], steam technology faded out. Now it's reemerging [why now? who's doing it?].
• People are now finding pipes underground. The concentrated steam makes it so they can create much more powerful magic and machines. [Who's finding the pipes? Who controls it? What affect is this having on the balance of power?]
• Magic is generally believed to come from within. Even most, if not all, of the magic users don't know that they're pulling steam from the atmosphere.
• There are steam pockets where the atmosphere feels heavier and magic works better.
• Magical creatures like faeries and dragons evolved [or were created?] after the steam magic machine began working.
• If the steam magic machine is destroyed, creatures that are reliant on magic will die (or at least be severely crippled).
• Faeries are trying to bring down steam technology, not realizing that steam is necessary for them to live.
• Some people have the ability to pull steam from the atmosphere and create magic; many do not. Steamers can't, but have learned to create machines that do, so now people who can't use magic on their own can use magic through the machines. This is completely shaking up the balance of power in their society.

Races

• Humans are the most common race in our main city (because, let's face it, we breed like rabbits).
• Our world also has faeries who are modeled loosely on European folklore, such as the Highland daoine sidhe ("theena shee") and sluagh ("slooa").
• Gnomes are not faerie folk. According to my research, they are actually earth elementals of the same class as slyphs (air), salamanders (fire), and nereids (water). They belong to a dead science rather than folk tradition. It was believed that man and all mortal creatures were made up of the four elements, but that elementals were pure, each native to and compounded of its own element. Gnomes live underground, moving through earth as freely as if it were air, and their function is to guard the treasures of the earth.

Our faeries
In Celtic and English folklore, faeries are either fallen angels, the decedents of deposed gods (such as the Irish Tuatha da Danann ("tootha day danan")), or the unforgiven dead. Our fey have different origins, but the "flavor" is the same: dangerous, powerful, and capable of great magic and deceit. Some are benevolent (though still vengeful and dangerous if insulted or angered), some are mischievous or meddlesome, and some are murdering and cruel.

Other traits:

• All faeries, even those that otherwise appear human, have a defect or deformity that they can't always hide. Hooves, tails, tentacles, extra fingers or limbs, a hollow back, etc.
• Faeries prefer nature and most have an aversion to cold iron, including tempered steel. Most have an instinctual dislike for steam technology.
• Most are secretive by nature and abhor anyone who breaches their privacy uninvited.
• Our faeries are notoriously capricious. Many are shallow. All are easily insulted.
• Humans and faeries are mutually distrustful.

Our gnomes
Gnomes being earth elementals actually fits very well with our steam magic machine. Let's say that they were created to protect it or evolved around it and are now protecting it. I'm having an extremely difficult time picturing gnomes as dangerous adversaries though, so let's just call these fierce little guys earth elementals, shall we?

We'll apply the term "gnomes" to the small number of earth elementals who have semi-recently emerged onto the surface and insinuated themselves into society. These buggers are similar to the gnome tinkerers that we all know and love, but with a dark side and a secret past that we can slowly reveal throughout our novel. [Why did they emerge on the surface? What are they trying to do? What do our gnomes look like? What are they trying to accomplish with their tinkering?]

Balance of power
The government in our city-state is a corrupt republic. People have to pay to vote, so only the rich and some of the middle class are able to vote. Those in power tend to stay in power, and over time they've become corrupt.

Magic users are mostly upper class because of the power they hold and the value of their magical services. The steamers - the mechanics who build steam technology - are mostly middle class, but are not rising up into the upper class from their new trade because the cost of materials is so high that there's only a small profit margin. They sell to the rich, who are the only ones who can afford steam technology, so most of the steam technology is controlled by the rich.

There's an entire substrata of poor who are stealing steam technology from the steamers and the rich and using magic to convert it for their own uses.

Until steam technology reemerged in the world, there was only one main political party, made up mostly of magic users and rich people, who held all the power. Now some of the politicians have split off from that party and created a new one. They're exploiting the steamers and using steam technology as a power boost and running on a ballot of change.

Between the oppressed poor, the steamers never being able to get ahead, the conflict between traditional magic and steam technology, the new political party, the unstable government, the poor stealing the steam technology, and some revolutionary/anarchic factions in the lower, middle, and upper classes, the city is on the brink of violence or all out civil war.

Miscellaneous notes

• At some point, maybe we should have a fight between a real dragon and a mechanical steam dragon.
• I finished the manuscript for my second children's book. Yea!
• I have a great image in my head for our first scene, so I'll be writing that this weekend.

Please
Pick up on any point that you're interested in and run with it. Make some decisions, flesh out your ideas, and jot down some notes in a comment. Thanks!