Hi A.,
I disagree with the use of "fairies" coming to take away pacifiers. To a child, if the fairy can take it away, they can also bring it back! If the pacifier is "broken," however, then they don't come back.
We started off by only allowing pacifiers at naptime and bedtime, then we cut it down to bedtime only. Then, just before his 2nd birthday, I cut the ends off all of my son's pacifiers and placed them around the house where he would normally find them. When he found a "broken binky," I would sympathize offer comfort that it was broken (WITHOUT offering to buy a new one), and encourage him to throw it in the trashcan. It took about 10 days for him to "find" and throw away all of his pacifiers (we had a lot of them!), but he was fine with the whole thing and knew that they weren't coming back.
Hope this helps. Good luck to you.