Ah, but there are bad elves. They simply are immune to some of the temptations that we humans have because of our more finite lifespan. And orcs are, well, orcs. They're fairytale goblins. They're not considered sentient last I checked.

In Tolkien's works, of course. (distinctly Christian worldview)
Not to sound argumentative... I just have worked through elves and orcs in my brain a lot.

I didn't say there wasn't conflict and tension. I just said it was hard for a writer to do.
There are a couple of sources of conflict and tension.
(1) good and evil really do struggle in this world. However, it is not so much in the physical as it is in the spiritual: in the hearts of the people. That battle is more even. God doesn't always 'win' because He gave us free choice... allowing a person to reject Him ('lose')
Many fantasies forget this. I don't really care for those kinds of fantasies because they're kind of empty. I do like the big-scale conflict, don't get me wrong. But if it's without the spiritual conflict, the character conflict...
This is why I don't mind Star Wars even though the Force is total bunk. The struggle is really over Luke's soul - it ultimately is his choice to do good or evil, which would be true if the story had a completely Christian worldview anyway!
(2) In the physical world, while God is in control of everything, sometimes evil appears to win. Which is where hope comes in.
It's not an overly good place to leave characters, though.
I will feel very cheated in a story if everything ends very depressingly and has 'aww, it's okay, they died and went to heaven' tacked on.
Justice still needs to be shown in a story. A story is not all real. It's your view of reality, and it needs to be crafted in a very readable fashion.
(3) In writing, there are places for both kinds of stories. I don't like to slam either kind.
Hope that clears up my viewpoint!