Was there ever a reason given why Azerothian Blood Elves didn’t realize fel magic was used to rebuild their cities? The average Blood Elf should know what demonic magic looks like, at least since the Second War.
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Blizzard storytelling 
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That’s pretty much a retcon…originally, the lore about it was the Blood Elves knew they were using green fel crystals to rebuild Silvermoon and the rest of Quel’thalas, and that some of them in Outland were even siphoning fel magic from demons directly…but they all had accepted it, because they wanted to stay in their homeland, fight the Scourge with every possible power at their disposal and rebuild it, unlike the High Elves who were exiled because they didn’t agree with it and ran to the Alliance because they couldn’t survive alone without the help of the Humans.
Later, after Blizzard decided that the Blood Elves needed redemption, and the return of the Sunwell sating their magical addiction and an armonic relation between its Light and the Blood Knights of Lady Liadrin (to the point that the focus on the Light almost became even more prominent than fel/arcane for the Blood Elves), Blizzard decided to retcon the original lore saying the majority of the common Sin’dorei population didn’t know fel magic were being used and didn’t know what they were absorbing, except for Rommath and the Magisters coming from Outland I guess.
So the only possible explanation is now that the Azerothian Blood Elves didn’t know about it because they didn’t see fel magic in action before, or they simply had forgotten about it…in the Second War they mostly just fought in Quel’thalas (except for Alleria and her rangers), but there they mostly fought the Amani, Orc warriors and raiders of Doomhammer and the Red Dragons of the Dragonmaw, not really any Demon or Orc Warlock. Gul’Dan himself was there but after stealing the power of the Runestones and creating the Ogre-magi he quickly departed for the Tomb of Sargeras because he couldn’t bring down the shield of the Sunwell anyway, so he and the warlock followers of his clan moved away quickly.
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Adding to what you said.
Originally the Blood Elven story was framed around desperation and just kind of generally doing whatever the hell it took, with the ultimate goal of joining Kael’thas, in Outland. With even their Paladins being remarkably Warlock-like, in their attitude toward the Light, after they got their hands on Mu’ru whilst siezing control of the Tempest Keep. (Even the Scryers didn’t know about Kael’s legion dealings, until like halfway through netherstorm)
At that time the High Elves, who still associated with the Aliance were odd bits and bobs strewn about the world as relatively small hunting lodge garrisons, which already had been isolated from Quel’thalas, for the most part by the time it has been sacked.(Making the Silver Covenant’s appearance in wotlk range from perplexing to flat out appeasing of outraged Aliance fans(which did not work))
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It seems like Voren’thal wasn’t present during the conquest of the Black Temple, because Kil’jaeden appeared as a gigantic vision in the sky at the end of the Blood Elf campaign.
At the Walk of Elders in Silvermoon, there’s an openly accessible room with cushions, couches … and two big green crystals with evil eyes. There’s even a magister occasionally siphoning energy out of them. Apparantly, we’re supposed to accept that the average Blood elf neither asks questions nor feels put off by places with much demonic energy. Despite the fact that the orcs themselves were pretty much “fel magic in action” (green skin, bloodlust etc), and they chose to make a pact with said orcs, as well as with the Forsaken, whose country got destroyed by undead and demonic forces.
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TBC storytelling in a nutshell… “See that major recognisable character you knwo and love?” You will kill him and get them lootzies!" It never made sense for the Blelves(and the Horde by extension) to oppose Kael’thas, especially given the fact that the Blelves joined to Horde specifically to enable them reaching Outland, in order to join him. (The reason we even went after him in TK was because he had learned the Cypher of Damnation, which gave him enough power to obliterate what was left of outland, even unintentionally)
Also the KJ deal illidan made was basically “Destroy the lich king or i will whoop your bum”
The Forsaken part is largely explained in the Ghostlands storyline, where they provide a great deal of assistance, in order to cleanse the place from scourge presence and slay Dar’khan. It’s even remarked upon by Thrall that Sylvanas was throwing a lot of weight around to even make it feasible and just went above and beyond to build that bridge.
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Yeah there are also a few demons who are free to walk around the city in the open outside of the Warlock basement, like at least two succubus and maybe imps, so it’s impossible they wouldn’t know…but at that point the city had already been rebuilt, so when they discovered fel magic was being used and their eyes had become green, it was already too late, they didn’t know it before that I guess…but as I said it’s basically a retcon.
Oh and by the way the fact that their buildings needed magic to stand and not collapse was a retcon, too…in Warcraft 3 Kael’thas only seeked a new source of power for the addiction of the Blood Elves, he doesn’t say anything about the buildings needing a magical source too 
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I’m not sure if you can call that a retcon. Many Blood elf buildings look like they need magic to be stable, like the academy of Falthrien. And I’m sure even the Arcane towers of Warcraft 3 needed magic of some sort. But they surely didn’t need DEMONIC magic, given that Blood elf engineers were able to build them before making a pact with Illidan.
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Lorewise Fel magic is considered more bang for your buck than Arcane, at the risk of being more unstable. The overarching attitude at that time was “Get power by whatever means necessary” to make up for the losses suffered during the sacking.
The whole story is rather suspect and lacking, but it kinda seems to me that the line is “demon juju is alright, but don’t deal with the Legion”… (I could go on a rant about the whole Naaru in a Sunwell and Liadrin’s sudden anurism thing, but that would get us way off topic.)
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But they did, it just never got past TBC, phase in game.
there a much simpler answer all those npcs you see going around mind controlling citizens wiped the memory from the citizens mind like the police state they are with the Tyrant regent lord controlling all information how would they know
we must bring freedom and democracy to the blood elves … and free them from the tyranny of their trio of evil rulers Lor’themar theron, Halduron Brightwing and Rommath
I know what event you are talking about in the Bazaar, but they were just two people, not like “mindcontrolling the mass of citizens” LOL
and also, they talk and act like High Elves of the Alliance. They are probably spies of the Alliance like the Dwarf and Night Elves in the Ghostlands. I wouldn’t be surprised if those two people show up as Void Elves soon (if Blizzard even remembers about them 
)
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ironically im pretty sure the dwarf ambassador was not actually a spy he was wrongly accused because of the blood elves malfunctioning Arcane Sanctums i believe one blood elf npc even points this out so the blood elves murdered an alliance ambassador … you fiends
now the night elves had no business being there but there nothing to really tie them to the ambassador
imagine this your an ambassador sent to talk with the blood elves and they lure you into an ambush and even defile your corpse by chopping your head off
Besides the dwarvish letter found on the Night Elf spy?
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sarcasm is so easily lost on the internet
And the quests never really explained what the Night elves hoped to accomplish, right? Sending assassins into Eversong Forest and building military camps in the Ghostlands isn’t that smart if you want to establish friendly relations with the Blood Elves.
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The case with Night Elves and Dwarves in Quel’thalas during Blood Elf starting quests was really poorly explained. Goes to show about the quality of TBC story telling.
To put it simply they were there simply due to the Draenei questline, where Alliance members that found themselves stranded on Azuremyst Archipelago due to the machinations of Kael’thas and his hired Gnome saboteurs.
Draenei aided the stranded Alliance people. Among them were Night Elves. And they saw the presence of the Blood Elves from Tempest Keep on the Isles that were in league with Demons.
Of course they didn’t know those Blood Elves were not in league with Quel’thalas as it’s citizens lost contact with the Thalassian host that ventured to Outland.
What transpired on Bloodmyst Isle must have shaken Alliance members to the core. Enough to investigate if indeed Blood Elves are doing some really nasty stuff.
In other words. Draenei questline takes place before Blood Elf one. When the latter is undergoing, Draenei are most likely already part of the Alliance and Night Elves took the course of events really seriously.
To the point of sending entire squad of Sentinels working in league with Prospector Anvilmar from Ironforge who was sent there as Alliance Envoy.
It ended up as all big misunderstnading. Blood Elves of Quel’thalas had no idea what happened on Azuremyst and Alliance had no idea that Quel’thalas had nothing to do with it.
And the presence of big Fel Burning Crystals did not help. Prospector Anvilmar was checking on Arcane Sanctums to see how they work, and I assume he was there also to check if any Demonic activity is to be seen in Quel’thalas.
Due to bad coincidence, West Sanctum started to malfunction. When Blood Elves went to investigate and fix the matter they encountered Night Elf courier that already had a report from Anvilmar about Sanctum’s workings.
When Night Elf was slain and message got found, it was easy for Farstriders and Magisters to put blame on the Dwarf and the Alliance as whole as being the force responsible for Sanctum’s malfunction.
Even though Ley-Keeper Velania said that it is unlikely true and the main reason why Sanctum went haywire was the fact it got oversaturaded and couldn’t meet the demands that were put on it. So it broke.
Prospector Anvilmar was slain and the Kaldorei scent led Blood Elves to Ghostlands where they were wiped out by combined Thalassian and Forsaken forces, forever more dooming any chances for Quel’thalas to become part of the Alliance.
Now why did West Sanctum malfunction. It is directly conneced to the very topic of this thread.
Thalassian buildings in order to operate and function require magic. When Sunwell was destroyed and magic ceased to flow in them, they simply collapsed. Or at least parts of them.
In order to rebuild them, Blood Elves required alternative source of magic. Grand Magister Rommath came from Outland with set of Fel Burning Crystals.
Apparently Fel Magic gives bigger punch and juice than Arcane. And so Silvermoon’s eastern part was rebuilt overnight when Rommath and his Magisters installed Burning Crystals.
But they were not that stupid to allow regular citizens channel or worse, feed on it. No. Burning Crystals were supposed only to power up the buildings and most importantly Arcane Sanctums.
Sunwell was located at the place where many Ley Lines converged. A potent source of power, the only places that could rival it were the Nightwell and the Nexus in coldarra. Arcane Sanctums were located on every Ley Line. When Sunwell was destroyed, they stopped functioning. But Ley Lines remained intact.
So when Burning Crystals restored Sanctums, Blood Elves modyfied their specifications to draw Arcane Magic from the Ley Lines. And by that time they learned how to turn raw Arcane Magic into Gems and Crystals.
Those Arcane Crystals became the source on which Thalassian population fed on. Not the Burning Crystals. Although their mere presence had the visible effect on them by turning their eyes green.
The demand for Arcane Crystals provided by the Sanctums was so great that they were working endlessly to provide Blood Elves the resource they required so much. Some of them couldn’t find balance in their magical addiction and became Wretched.
In de-canonized RPG for Warcraft it was stated that body of a Thalassian Elf naturally can absorb the magic once they come into contact with it. Like a sponge that absorbs water. So perhaps this was the case with the Blood Elves and Burning Crystals. Their bodies naturally absorbed some traces of Fel magic radiating from the Crystals.
To wrap it up, my final opinion is that Blood Elf knowledge about Fel Magic was substantial. At least in terms of speaking about Magisterium. Those who needed to know, knew much.
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Taladris, your analysis is on point and realistically correct with the course of events that happened, but usually with Blizzard there are conflicting sources.
In particolar there’s a canon one that is really important, if you read the book “Rise of the Horde” by Christie Golden, in the beginning of the book in the prologue, Thrall writes down that the Blood Elves are already officially part of the Horde, then in the end of the book in the epilogue, Thrall gets a messanger bringing him news that the Draenei have just crash-landed on Azeroth, and that they have joined the Alliance.
So for Christie Golden and the book “Rise of the Horde” at least, it is canon that the lore and quests of Quel’thalas happen first, and then the questline of the Draenei on Azuremyst Isles happens later 
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Last time I checked, it was still visible in game. A crowd of Blood Elves citizens question whether they should join the Horde or not, and say that the leader of the Forsaken isn’t the real Sylvanas. Several mages appear at some point and wipe the memories of all the people on the scene. I highly doubt that this is the doing of the Alliance, since the point of the manœuvre is to make the people there accept to join the Horde and consume fel. It was 100% Rommath’s doing.
Her novels can be entertaining, but can hardly be trusted when it comes to this kind of details…
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The Blood Elves didn’t really consume fel. There were two distinct groups in TBC Silvermoon and Kael’thas’ expedition. The former largely scavenged what they could from the ruins of their old homes (such as in the quest major malfunction) or by devouring mana bearing creatures (shown in one of the first quests you do; thirst unending). While the latter descended into the service of the legion and began enslaving blood elven pilgrims to work in the mines in Netherstorm. Communication between Silvermoon and Kael’s crew was shown to be incredibly difficult too!
The Warcraft Encylopedia (which was on the website with TBC’s launch also had:
“Even so, the prince’s relatively quick acceptance of dire measures (e.g., draining magic from demons) is by no means characteristic of blood elves in general. The blood elves of Outland have by now discovered Kael’thas’ agreement with Illidan, and they have for the most part become convinced of its necessity. Most blood elves still live on Azeroth, though. Few of these elves know of Kael’thas’ pact with Illidan, and many would be horrified if they discovered it. Draining magic from small mana-bearing vermin is a far cry from draining magic from demons. Yet, as their hunger grows, blood elves–particularly those in Outland–are becoming increasingly inured to the things they must do in order to obtain more magic.”
Surprisingly, there actually isn’t a single direct mention of fel magic at all within Eversong or the Ghostlanda. Nada. Not once. Only allusions to it such as mages attempting to “cleanse corrupted magic” in the quests Abandoned Investigations and Word From the Spire.
Ultimately as much as magic pervades both blood (and high) elven society, I doubt that many really knew what to look for. It was mentioned earlier but when was the last time the plebian masses encountered it? The High Elven exiles sent to Quel’lithien lodge were exiled due to balking at draining from mana wyrms (again there isn’t a mention of fel here and surely there would have been a larger uproar about that).
Ultimately, I imagine the actual contents of the Burning Crystals was a well-guarded secret that only a few were aware of in a similar vein to Kael and Illidan’s relationship. Whether that means that some NPC’s you interact with for quests are lying to you, feigning ignorance to the cause of some problems (the tainted arcane elemental on Sunstrider Isle) or just straight up ignorant themselves is anyone’s guess.
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