Well, that's two questions I guess. You actually need to give the fairy queen those 3 items *before* you defeat the goblin chief. After you do that, you will get that scene with the white light and will never be able to go back there, even if you avoid the crappy end.
To avoid being trapped in the fairy land, there are a couple of solutions. The obvious one is to use the cold iron charm from the goblin camp, but if you used that already, just use the dagger on yourself.