Morgane is first mentioned in Geoffrey of Monmouth’s Life of Merlin, so right off, you know that this is going to be fantastical and historically inaccurate. Still, he found her somewhere, most likely in Welsh mythology. ‘Morgan’ is a man’s name in Welsh, but the creation of this character appears to have its roots in The Morrigan, the Celtic triple goddess (see http://www.sarahwoodbury.com/women-in-celtic-myth/) who is a goddess of war among other things. Morgane is also possibly related to Modrun, a specifically Welsh mother-goddess: The “name means “divine mother”. Often conflated with the Roman Matrona, she is the Tutelary of the Marne in Gaul. In Britain, she appears as a washerwoman, and thus there would seem to be a connection with the Morrigan. She is one of the most potent of the Celtic archetypal mother Goddess. She is also a fertility and harvest deity often equated with Greece’s Demeter or Ireland’s Danu. She was the mother of Mabon who was stolen away from her when he was three days old and later rescued by King Arthur.” http://www.joellessacredgrove.com/Celtic/deities.html
“In the Welsh myth, before Geoffrey’s time, Morgan was identified with the goddess Modron, the daughter of Welsh god Avallach, and the mother of Mabon. In the Welsh Triads, Modron was married to Urien, king of Rheged and mother of Owain (Yvain) and a daughter named Morfudd. In the Arthurian legend, Modron and Morgan le Fay became one and the same person, because they both were married to King Urien (brother of King Lot), and both were mother of the hero Owain (Yvain). It is most likely that Modron was changed into Morgan when the legend arrived in Brittany.” http://www.timelessmyths.com/arthurian/women.html#Morgan
In the Welsh stories, Morgane is never the mother of Modred, nor is Modred Arthur’s illegitimate son. Typically, that is a later French invention. Modred is the son of Morgause (also known as Anna), another sister of Arthur. Anna is married to Lot.
‘Fey’ is, of course, a word for ‘fairy’, and throughout, Morgane is viewed as mythical, a healer. “She is also presented as one of the women who takes Arthur in a barge to Avalon to be healed. This view of Morgan as healer has its roots in the earliest accounts of her and perhaps to her origin in Celtic mythology. In the Vita Merlini (c. 1150) Morgan is said to be the first of nine sisters who rule The Fortunate Isle or the Isle of Apples and is presented as a healer as well as a shape-changer. It is to this island that Arthur is brought (though Morgan awaits him and heals him rather than actually fetching him herself).” http://www.kingarthursknights.com/others/morganlefay.asp