I've been thinking about what you wrote about a "Toy Story" type of feature. I think it could be very good as long as someone like Alan Lee was involved in an artistic consultants position. It would allow more flexibility than live action, and it likely would be better to be more consistent than if they did a split live action/CGI as has been proposed. It also would probably allow for maximum effort budget-wise, if they're only hiring the voices, although I'm sure that kind of work is very expensive as well. I would prefer that they pull it off with live actors and really put the best effort (i.e.: budget) possible into it.

Another favorite "Epic" literary work of mine is "The Stand" by Stephen King. After much anticipation, they finally put that to film (TV mini-series-four 2 hour episodes), and I was awfully disappointed. It was probably the only way they could keep the integrity of the script, but filming for TV is much more limiting than filming for the big screen. I would hate to see a TV version of LotR for this reason. Trying to make Minas Tirith look as awe-inspiring on TV as it is in my imagination would just be impossible on the boob tube. I couldn't stomach it.

After following Michael's links to that article in the New Zealand newspaper calling for the extemely tall and short convinces me that something is happening down under.