Change their DAMBLOCK to something positive, and make them have children in larger groups and grow up faster. Perhaps increase their maximum population per settlement.
It can't completely compensate for wooden equipment, but you'll enjoy seeing five thousand elves attacking a few dozen enemies, and losing horribly.
Well, acually, elves can compensate quite well for their wood. They're just weak to megabeasts. I've had a settlement with 2 elves that repelled more than 10 goblin attacks (which were pure dwarves). Their ultra-high attributes, immortality, and non-killing of each other lets them get legendary in everything. In a different world, their numbers helped slowly defeat the largest non-them civ, as it was a long series of battles saying:
"A: 4000 elves (200 losses) vs D: 2000 humans (150 losses)"
"Defender was victorious"
until the humans fled due to being unable to reproduce the losses from the battles (elves can reproduce them because of immortality)
The main reason they die is megabeasts. Dwarves are the epic against them, humans good, goblins idk, and elves... get pwned. Lower your cave number. Something else you can do is increase wood's MAX_EDGE number in material_template_default, that is quite evidently wrong considering the effectiveness of a real wooden weapon. A value of 1200 is better, and probably more realistic.