A Wizard ally could be far more useful with his powers, then simply stripping a Wizard of them. Perhaps servitude? (Would impede her/his free-will, not another's). Bare in mind the Fae as a whole are a rather manipulative group, they'd likely want something that would further their own goals.
Saying that, I could see why being indebted to the Fae-court might be something you'd wish to avoid as a player. But then so is loosing your power. If one player is already a Winter Knight, it would hardly be the end of the world if you were forced to be on their side, instead of just choosing to do so.
Perhaps the classic, 'a favour' case scenario. Plenty of opportunity for the Faery to send you on a seemingly innocent quest, which ends up leading your character through a metaphorical tunnel of darkness and bad choices, with very little way out without doing something immoral; potentially tainting your soul (lawbreaking). Although, there usually is a way out of said situations, its just finding them.
The situation you're in sounds really cool though, so many possibilities, kudos to your GM & Group.