I am trying to hunt down a book I read in the 90s, but lost some time ago. It starts with some children wandering in a wood, and they encounter a wood nymph creature that starts following them around. Eventually, the wood nymph becomes accepted, and starts to live with humans. The more time he spends with them, the more human he becomes. There is an incident where he cuts off his finger as a party trick expecting it to grow back, but instead it bleeds, because he is not made of wood any more.
So he starts to live as a human, except he does not age at the same rate and he lives for hundreds of years. Eventually, he becomes an alchemist, although I forget the purpose of his experiments. Finally, after a few hundred years, he walks into his garden and plants himself, and becomes a tree.
Does anyone have any ideas?