The reference of Western Elf or Gone to the West is in relation to the final resting place of the Elves. When an elf dies by choice of passing, they can go directly to the Westlands, a mythical sounding land that is the final resting place for many elves. Gone to the West references the Elf making a choice to pass on instead of dying from violent means.
A Western Elf is a slur denoting one who has returned from the Westlands after dying and plagues the land as a quasi-undead creature. While many were slain, the gateways are open and they tend to return without much issue, only taking the time it requires to transit back to the place they died.