Thanks for the discussion of Out of the Earth by Arthur Machen. When I read it, I didn't really know what to make of it; I think I thought too much about other tales of Machen with (references to) little people/faeries in it, and only really saw the how-rumor-grows aspect. But now I heard the discussion I like the tale a lot. Beautiful how Machen uses these little people on a dubble symbolic level: as the evil evoked by the war as well as the cruel and wrongfully warring people themselves (misled by a wrong governence). And I always like the role of the innocence as the only ones seeing what's going on.
As a beginning writer myself, Machen's pageturner-technique of pretending to assume that the reader knows what he is talking about, appeals to me a lot - I must remember this for my own tales!
This wasn't really a discussion topic, but I wanted to share my enthousiasm ;-)
I can see how you guys thought otherwise, but it seems to me that there was no actual man in a white hat and no murder was committed. It was an analogy for the things that happened on the trip that he thought nothing about when they happened, but imbued with significance after the fact upon learning new information. Machen even switched from first person to second person for the white hat example.
That his son had mentioned “funny children” is the sentence following the white hat example, but Machen doesn't give the whole “funny children” story until the fourth to last paragraph of the story. So the reader has to go back and make the connection to the man in the white hat, sort of paralleling what Machen had to do with his son's stories of “funny children.”
I'm glad you liked this story. I think it's vastly underrated simply because it isn't as grandiose or epic as his more famous works, and especially the other stories in the Little People cycle. I also think that technique needs to come back more, so I'm happy that you're thinking about using it. The world needs more Lovecraftian hoaxes!