Well....that part in the movie when Frodo says 'Wood Elves' always makes me laugh because it's silly. Mostly it's the way he says it, like those 'wood elves' are some extinct or elusive species of the woods which must not be alerted to their presence / disturbed out of their habitat. Secondly because from the first time I saw it in the Extended Edition, I understood exactly the thought process at work here, to introduce the 'elves' from afar to the non-book reading audience, who have no idea what elves are and name them '...wood elves, because they happen to be in a forest, right? This way the audience won't be confused at all'. Also as Sam and Frodo watch them from afar in awe, they appear as visions of light and splendor, much like the book-reading audience envisions High Elves. The NBR audience would just assume all elves are like that, be they the wood, hill or dale species.
High fives all around!