: I think you have it right, Steve...Illuvatar, and to a slightly lesser degree the Valar, know what's going on and have pledged to stay out of it, to let the choices take their appointed paths. However, why did Gandalf (Olorin?) get involved then? Was his involvement part of the overall plan or did he just have an attack of worries about Middle Earth and decide that he should lend a hand? And was he sent or did he choose to come on his own (did somebody else bring this to his attention, like his 'superiors' or did he view the situation and say this has gotta stop)?

The Istari were chosen by and sent by the Valar, arriving in Middle Earth ca. 1000 of thr Third Age. See the chapter on the Istari in "Unfinished Tales."

: Does Gandalf, being a 'lesser God,' have freedom of choice as well?

Yes. See the chapter referred to above.

In fact, of the five Istari sent to Middle Earth, only one stayed true to the mission of contesting with Sauron. The Blue Wizards went into the East and passed out of the knowledge of the Wise; Radagast became enamoured of animals and growing things; and Saruman, of course, was corrupted.

Oberon