I have found a huge list of fairytales on the cool site Wikipedia:

https://en.m.wikipedia.org/wiki/List_of_fairy_tale...

With that said are we going to be making the game with kids in mind? Or have more of an adult focus? Of course we can go in the middle.

I'm just programming but I vote more on an adult theme.

LOL, I try and do kid stuff, but sadly my mind has always been related to themes of sexuality and violence; however, many fairytales have both. What has changed is what certain people deem as appropriate for children or what they find offensive. So just label your content to what age demographic you feel your game is; also, warn people what they may find offensive (i.e. sexism, racism, nudity, BDSM, graphic violence, language, drug use, Talyor Swift, etc.).

Also, keep in mind what country laws you may be breaking. Some countries do not allow pornography, but allow movies like Pulp Fiction to be played in movie theaters.

As for the other question: You pick what story to base your game on, or you can make a new one based on others like Sherik.
Thanks for posting :D