I've been told that in one of the Changeling: The Lost expansion books it describes a possible origin of the Fae as actually having been changelings themselves, that lost too much clarity. Which book is that?
Beyond what is presented in the core book:
Rites of Spring
In particular chapter 1:
The Options presented in the first chapter of Rites of Spring are:
There are a few other options presented less clearly in the book. All of the above directly given ones are a bit simplistic, though after reading them you will realise they are not as simplistic as they sound. A fuller reading of a lot of the fluff in Rites of Spring will let you understand the nature of Arcadia, and help you foment your own theory.
Don't just read the the first chapter though. There is some great suff in chapter 3, page 62, relating the Fae to Glamour
Equinox Road also has some content on this, in particular for playing tha True Fae. You want to mostly look at Chapter 3 of the Equinox Road for "What are the Fae".
There are also rules for high Wyrd,low Clarity changelings becoming the Fae. (Or at least as Alien, and powerful as to make no difference). However this does not have to be true.
Creating new True Fae doesn't have top be a thing that happens. The greater Fae are for all intents indestructible. Perhaps a few times every century, a truely great changeling manages to destroy his keeper (Sacrificing no doubt his motley and perhaps freehold on the way). But was he truly destroyed, forever? Perhaps just this form. Perhaps while humans have the dreams that brought him into existence (or what ever your cannon is) he will return. Or with his death, then someone will take up his Titles, (perhaps the killer, in what I find a truely delicious contract).
Remembering of course the Goldern Rule of WOD: The storyteller makes the rule (Especially for Fluff like this). Take and keep what you like.
Both Equinox Road and Rites of Spring are presenting options, There is no one definitive canon answer. No matter what you decide is the canon for you game, some changeling will likely posit any of the above theories, or something entirely new (right or wrong).
I have heard that somewhere deep in some of the Mage splat books there is another explanation, relating the creation of arcadia to the Fall of the world, and that for the Fae Arcadia never fell. But I haven't seen the book myself
You're thinking of Equinox Road, which is the book that discusses the Changeling endgame, returning to Arcadia, and Changelings transforming into True Fae with too high a Wyrd score and too low a Clarity score.