I think we are missing something very important. That is, the roots of racism. One of the roots is Mistrust.

Initially, there was no negligible mistrust between elf and dwarf. By the end of the First Age, events had occured which sowed the seeds of mistrust. The events have been mentioned by many.

During the Second Age, other events no doubt occurred which deepened this mistrust. We know nothing of these events. The events need not have been major, but only minor or isolated events that would feed the mistrust.

By the Third Age, the mistrust is much deeper. An event like the capture of Thorin & Co., though minor, would continue to feed the mistrust.

Another root is misconceptions and stereo-typing.

In the discussions so far, misconceptions and stereo-typing have been used by writers to make a point, but not identified as such. All dwarves are greedy and secretive, elven pride etc. are a couple of these. Sorry to say, I've done this myself. However, this does prove the point that misconceptions and stereo-typing are present in us, just as it was no doubt present in elves and dwarves.

Events or actions by an indivigual or group that conform with our misconceptions and stereo-type reinforce those misconceptions and stereo-types. No doubt that this had also happened with elves and dwarves.

Racism, as we know it, between Elf and Dwarf may not have existed in the Third Age, but was well on its way to becoming a reality. The friendship between Legolas and Gimli removed much of the old mistrust, misconceptions and stereo-typing. However, sadly, I do not believe it eliminated them in their entirety.

After the passage of time, those same roots would resurface in the relations between men, elves and dwarves and would lead to the estrangement of those peoples. Roots that would also drive a wedge between men and hobbits.