The problem with that interpretation is that the residents of Red Crossing would have noticed that they were never massacred, even if no one else did. The town still exists, presumably not with descendants of it’s original residents, but if there were survivors I think that the truth would have gotten out. The people would have their own records. Their grandbabies would wonder how it was that grandma lived in Red Crossing her whole life when she was born in 2:02 and so on.
Not necessarily. Regardless of what happened to Red Crossing before the actual armies entered the stage, it seems that there was:
1. A human army that marched on Dales (for some reason RC incident is considered as one prompting the human attack so I'll assume here that humans sent their armies first)
2. Human army retreating (and retreating armies don't like to leave supplies behind) followed by an elven army marching with the counter-offensive
3. Retreating elven counter-offensive (again, retreating army and a settlement that can have some supplies to plunder/deny the enemy) followed by the human counter-counteroffensive
Basically, that likely was one unlucky town that got plenty of "opportunity" to be plundered, burned down, its inhabitants conscripted, killed or scattered. We're talking about ten years of war that consumed the area. Even if the city town it's people were completely untouched before the war, they sure as hell wouldn't be when the whole mess ended. What would remain would quite realistically be scattered survivors overwhelmed by cruelty of war. Not exactly the kind of people who would feel a burning need to correct anyone speaking of a massacre that started it all.
You are correct that the villagers weren’t explicitly killed. But it is very much implied. The only realistic alternate explanation is that the knights let them run away, giving them the opportunity to properly arm themselves and get reinforcements, then waited by the bodies of the fallen/incapacitated until more humans arrived. In that scenario the elves are acting beyond stupid. Now, I am not entirely adverse to that interpretation, but it’s one that most people who defend the elves usually frown on. 
And here I must disagree, not because I don't think some people died there, but because I don't think NOT killing them would be such a "beyond stupid" move.
The elves didn't intend to attack the village - especially not at that point, where they just realized they shot a girl with flowers. When more humans came, they retreated. Basically, they could chase off that bunch of people who attacked them first and not really worry about them too much - it doesn't matter if the initial attackers are alive (and better armed) if you don't intend to fight them.
Killing the attackers would be necessary only if the elves were actually planning to follow-up and attack the town. And I don't think they were (oops, we killed a human armed with flower. Ok, guys, let's slaughter the rest of them while we're at this).
Oh, and one more thing (no quotation here since I'm lazy): elves likely considered that they would have to fight, but that doesn't necessarily mean they wanted it (ok, most of them, we don't know what really was going on in Siona's head...); and I think they could've avoided it. Imagine if a bunch of armed elves appear at the gates of the town and they demand to speak to Elandrin. Would human first reaction be to attack? And wouldn't Elandrin come out on its own? I think the fight was perfectly avoidable at that point.
Especially since - when we think about crossing the border, we apply our standards and it doesn't necessarily have to be so. Borders tend to be quite fluid and blurrry even in modern-day Thedas. Then it was likely more like "so, this here is a human settlement, so it would be Orlais". That forest where Siona's sister got killed likely wasn't on either side of the border - it WAS the border. While a bunch of soldiers from a neighboring country approaching a settlement would count as an invasion in our perspective, the same situation in Thedas, especially Thedas of the day, would be a bit more ambiguous. Not that it couldn't prompt a violent response, but it didn't absolutely have too.
Of course, regardless of all that whatiffery, when dead bodies started to pop up, any possibility of peaceful resolution shrugged and went to nearest tavern to drink itself under the table.