A centaur is a teacher, so it is not a faerie.
The magic realm has no way to make hybrid forms, so it is not of the magic realm.
So what realm do centaurs belong to?
Magic could have a horse that has traits that would appear human to the untrained observer so as to be more perfect at the things that make a horse a horse. Takes a bit of left-field justification, but it can work.
And Faeries can totally teach. There are plenty of stories about people learning from centaurs, so they'd likely have one of those fake-skills emulating Teaching. The thing Faeries are exceptionally bad at, rather, is learning, not teaching. So a Faerie centaur could teach, but likely could not be taught anything.
Faerie fits since centaurs are a manifestation of the boundary between man and beast.
Also, they're described in RoP: F. Some demons might also take centaur form like those in Dante's Inferno.
Faeries have at best very limited ability to teach, which does not fit with centaur lore at all in which they are extremely learned and able teachers.
At default, yes, but there are the virtues Faerie Instructor and Faerie Trainer (pgs 62 and 63 of RoP:F) which can change this to some extent - Faerie Instructor basically allows a faerie to give a mortal an ability up to some specific level (albeit the faerie has to have got it from another mortal at some point previously, and it is swapped for another ability the mortal has), which can simulate being an extremely able teacher, and Faerie Trainer allows the Faerie to have ability rather than pretense scores in one or more abilities, which it can then train others in normally. Just say that all centaurs have one or other of these virtues.
Any realm that suits the story being told. Dragons are found in the magic realm, and are no more "unreal" than centaurs. A half man-half horse strikes me as darn mythical, as does a fire breathing winged lizard the size of a large manor house.
Also where is it dictated that magical creatures cannot be "hybrids"? There are a range of creatures which could easily be magical rather than fae. What am I missing from the RAW that backs this view? Mermen, sphinx, pegasus, unicorn, etc.
There's really no limit on what creature can be from what realm. Centaurs would 'mostly' be considered faerie given their association with greek heroes and mythology, but there could well be magical ones, just as there are both magical and faerie giants (and divine and infernal giants too).
I'm looking at ROP:Magic and cannot find how to make a hybrid magic character.
Your OP wasn't clear what you were making, just what realm a creature should relate to.
A centaur as a character is firmly in the YSMV as it would need to be approved by each SG. That said, I don't think a centaur needs a special virtue or attribute outside the material already in RoP:M and core for it's physical form. There are some advantages to being half horse, but there are also many disadvantages.
Perhaps a generic flaw for interaction called "Looks like a Centaur (almost everyone in Europe) -3"?
Canonically, centaurs were a magical race, but were driven nigh on extinction in ancient times and most of the modern ones you see in 1220 are actually Faeries pretending to be a centaur.
As to how you stat them up, I'd be tempted just to write them up as magical knights and claim the centaurish bit is a cosmetic effect. Then again, I'm a bit loose with the rules sometimes.
Like the Magical Monster flaw?
Loose with the rules is good. 
Anyway, I'd say Chiron was a magical beast who happens to have a human torso, fully-human intelligence and teaching skill.
Whether a creature is Magical or Faerie depends on which Realm they happen to come from, and it's perfectly possible to have Magical and Faerie versions of the same thing.
There is a centaur written up in Sub Rosa #4, although it's pre-RoP:M. It might still work for you in a pinch, though.
-Ben.
All magical "humans" have to take the Monsterous Appearance inferiority, which means nearly everyone who sees a centaur would attack it or run away, which seems a bit extreme. On the other hand, making a centaur starting from a magical animal is also problematic at best...
As a magical creature, I'd suggest you do it as a Magic Human. (A centaur does have a monstrous appearance, right?) Then you can appropriately increase its Characteristics and Size with Magical Qualities.
I don't think most people would attack or run from a centaur on sight.
Really? I imagine most people would flee from a centaur if they encountered one.
In mythology, most centaurs are often seem as brutal and savages. The greatest exception would be Chiron, who acted as mentor and teacher to various heroes.
So most mundanes would probably hid or run from them in normal circumstances. The supernatural was mostly seen as dangerous.
On tC&tC therea re one beign centaur/scorpion thing... but to make it Magical, I said: Magi Human, Magical Blood (Magical Animal), Monstrous blood (Animal), Animal deformity, Magical master and the Monstrous Appearence taht is free to Magical Humans, Gigantic to the +2 or +3 (it's just bigger with the low body counting more thant the upper).
I don't have the book, but isn't there a quality that lets you buy that off? (Though a centaur is still clearly a nonhuman and probably something to stay very far away from.)