My guess is that it depends on the fairy tale. CINDER EDNA is something like 1600 words, I forget exactly. It's hard to write a FF of Cinderella or Snow White in 500 words or less. Of course, I sold CE a long time ago.
But I have another similar story that's even longer that was purchased several times by various publishers, including one fairly recently. It had some problems, so it never got published--but not because of the length. (It had more to do with illustration difficulties.)
Having said that, an agent I know told me she hasn't sold a picture book longer than 600 words in years. If someone falls in love with your story, anything is possible. But with so much competition these days, the fewer problems you make for a publisher (and a long story IS a problem), the greater your chance of selling it.
Just my opinion...