HP isn't a mary sue because he didn't need to be. He was a rich kid who inherited both fame and adoration from most of his new world. The most powerful people in the world were his new teachers and they favored him. He attracted friends like a normal protagonist but they weren't that special. The real thing that made HP effective is that Voldemort was a friggin idiot. Instead of taking over more of the wizarding world and subjugating powerful institutions, he was pretty hellbent on just killing Harry. Which allowed all Harry's powerful allies to focus on defeating him.

Agreed with the house elf thing might actually be realistic in the setting. The kids and adults had more important things to focus on. Deprogramming thousands of elves might have taken away from not getting horribly murdered. But since this is a story, there really should have been follow-up. Even in the epilogue when a decade passes they could have addressed it. In the movies on the train platform with the kids at the end they could show free elves and give a one line about it.