The Earthly Knight by Janet McNaughton

I love reading books about the Middle Ages and this one didn't disappoint (actually, it takes place prior to the Middle Ages). It's set in Scotland in 1162, when Norman lords have been given land in Scotland by the King of England. Jennie lives with her father, a Norman lord, and sister Isabel, who was recently disgraced by a wandering knight but refuses to tell her family what happened to her when she ran away with him. Now her father turns to Jennie to make a valuable wedding match, but she falls instead for Tam Lin, a mysterious man from a once powerful family who was said to have been raised by fairies.

This book has just enough magic realism to make you believe it's true; McNaughton weaves two old folktales, the story of Tam Lin and the story of Lady Isabel and the Elf Knight, into a satisfying book. Jennie is outspoken but she still understands the roles that women must play in her society. While she is at the mercy of her father's wishes, she manages to insert her own independence into her fate.