Aslanii:
The matter of elves achieving levels as a fighter & as a MU (magic user) was covered in the Alfheim gazetteer, page 14, 5th paragraph. I quote:
"The experience point levels are the same as those for elves increasing their fighting ability, but Experience must be applied to either their fighting or magic, not both. In effect, the elf becomes two characters progressing in two separate character classes, the Elf Lord & the Elf Wizard.
The reason for splitting the Experience Points between two classes reflects the fact that the elf must learn his new magic from the elves of Alfheim (or any other major elf population area with Treekeepers - it cannot be learned in areas such as Glantri or Karameikos where the majority of the population is non-elf) while he must learn his new fighting from humans."
DM Discussion = Treekeepers, Glantri & Karameikos are a special elvish character class & two regions in Mystara, respectively. However, elvish magic casting while in armor would require an elvish trainer to learn the spellcasting. Spellcasting while wearing armor is a unique elvish ability. I think fighting can be learned from any teacher who speaks a known language with the character.
Note that the elf character can decide where to apply their XP. The elf does not have to use a spell during a physical fight to apply any XP solely to his magical XP (to apply towards a level increase).
OK, I found a copy of the Alfheim Gazateer online, and that was NOT from page 14. Took me a while to find it. It's on page 63, in the section "Elven Magic". The paragraph previous to what you quoted is vital for the context.
This is not how the Elf class works normally, it's the rate at which 10th level Elves can improve their spellcasting above 10th level ability, if they have the right teacher. XP above level 10, if using this rule, can be split between XP for Attack Ranks (as per Companion Set), or for improved casting ability, using the same XP benchmarks for Attack Ranks.
I was kinda worried that you'd want Elf characters to work their way up to 4000xp just to gain either a level of Fighter or a level of Magic-User.