In a nutshell, the LotR adaptations are not Tolkien's story. Jackson (and his producers, editors, and distributors) did what movie makers have to do when adapting a mammoth epic to the screen by refashioning scenes and reshuffling them to make the story into a more visually and chronologically understandable piece, but he went too far. Boy, did he ever. We had to do without Tom Bombadil and "The Scouring of the Shire", which were regrettable necessities, although the latter really was an important illustration of the evolution of the characters of the four main Hobbits and gave a logical reason for their later ascendancy to the governing of the Shire. Nevertheless, they were tangents to the main story and would have bloated the plot. What I cannot condone, however, is Jackson's liberal misuse of Tolkien's characters, and this has been complained about in countless threads around the net. Not only do we get a weak, overly emotional Frodo (furrowed eyebrows do not equal good acting, by the way), but Sam, Boromir and Faramir, Éomer, Gwaihir, Elrond, Arwen, Treebeard, and others have been bludgeoned by the screenplay into almost wholly different characters.
In some instances they've been made almost opposite from Tolkien's originals, but in all cases stretched or combined to better fit the Hollywood mold of dramatic films. In LotR, this is epitomized by Jackson's insistence to make every character have a fuller, more conflicted personality than Tolkien intended. Some of the switching of dialog between characters might be understandable to make the story more succinct, but such turnarounds as Sam's cruelty and the confusion of motives in Faramir to make him look as if he might have gone the way of his brother are simply unforgivable. Sam routinely abuses Gollum, a horrendous insult to Tolkien's character; he is arguably the most earnestly noble person in all of Tolkien's works, and the idea that Frodo (even in his Ring-induced darkness and influence of Gollum) would turn away his most loyal friend is as far from the original story as one can get. Having Faramir vacillate about Frodo and the Ring to the point of having the Hobbits dragged to Osgiliath went against Tolkien's clear intention of showing him as a paragon of a chivalrous and honorable warrior of old, a return to the noble blood of Númenor. That Boromir falls under the spell of the Ring is not supposed to be a sign of his weakness of character, but the twisting of his almost blind loyalty to Gondor and its place as defender of free peoples; and his brother's triumph is that he understands that his true loyalty is to what Gondor stands for rather than to the kingdom itself. This is not a conclusion that Faramir has to come to but an integral part of him that contributes to his estrangement from his father. Gwaihir and Éomer are in part combined to the detriment of both, Elrond is made out to be reluctant to take the side of good and even seems deviously trying to stop his daughter's choice to be with Aragorn, Arwen therefore is shown doubting that choice (let's not even get into Jackson's pandering expansion of the love story), and Treebeard is shown as basically a wandering fool who must be driven to wrath.
What is wrong here is not just that none of this is true of Tolkien's characters, but that it undermines the very idea that they have their places in the story because they are the best of people. There are no accidents or moral dilemmas in the modern fictional sense in Tolkien's world, and the good side wins because it is definitively good, not because every character overcomes his bad side. In Middle-earth, there is only one Bad Side, and even Saruman's fall is not supposed to be tied to ambition, but to his failure to overcome the will of Sauron, who is ultimately behind every evil in the story (actually, Morgoth is behind it all as having sung his discordant note into the very structure of the world, and Sauron is his most powerful agent). All of the characters who are seduced by the Ring are not meant to be caught by their own hidden desires but given those desires by Sauron. This reversal underlies every major trouble I can see with the adaptations, and so dooms the work as a "this is how it should have been written" derivation rather than a faithful retelling. Regardless of Tolkien's incessant insistence that LotR was not an allegory, his characters are purposefully set out as game pieces and never really become multi-dimensional. This can be legitimately criticized, but in a literary venue. A director, especially one purporting to be an avid fan, should not take it upon himself to make such a fundamental change in a story, in this case 'modernizing' its characterizations, to make it more palatable for a general audience. If Jackson had a problem with the stiffness of Tolkien's characters, he should have left the job to someone else. If he merely has misread the themes of LotR, then he can be forgiven, but that does not redeem his work.
Besides Jackson's changing and wrongly trying to fill out Tolkien's characters, he also goes too far in reediting the story to give it a chronological continuity and cut down on secondary and tertiary characters. I've given a few points, but I can't possibly give a full list of scriptural changes in dialog and action. To put it simply, I was hard pressed to find a single scene in the whole trilogy that was not tweaked, added superfluously, or altered in a way to inject something that Tolkien never even implied. From Frodo riding with Gandalf in their introductory scene (and Gandalf setting off some fireworks for the trailing Hobbit children) and the Elves showing up at Helm's Deep for Haldir to find an untimely (and noncanonical) end to the numerous problems in the audience hall scene with Théoden being possessed by Saruman, there seems to be no plot point or bit of dialog that Jackson did not feel the need to alter. Even Gandalf's signature "You shall not pass!" on the bridge in Moria should be a repetition of his seconds-earlier "You cannot pass!" (although, despite what legions of rabid fanbois claim, the balrog can be said to have wings, since Tolkien mentions wing-like shadows or some such). In any case, Aragorn would never have decapitated a messenger of Sauron, Gollum had no explicit second guessing of his intentions much less an argument with his 'Ring side', Merry and Pippin were not playful thieves of Maggot's farm (and did not join Frodo and Sam there), the dead army did not fight at Minas Tirith, and on and on. Many of these things could be forgiven for being necessary changes to save time, but not the whole mass of them. And so many were completely needless, and added questions where none existed in the novel. For instance, why have Frodo see Gollum in Moria instead of on the river, since Gandalf had already explained back in the Shire about Bilbo's mercy regarding him? Why have Elrond wait until Aragorn is about to go on the Paths of the Dead to give him Andúril, when in the novel he had been carrying the sword ever since Rivendell? I can see that by having Boromir pick up the Ring when Frodo drops it Jackson is showing his gradual fall into its power (and Aragorn's distrust of him), but neither the scene nor the slow buildup is evident in the novel; Boromir gives no indication at all of succumbing until the Falls of Rauros, and even then it's a momentary loss of reason. Even Frodo shows far too much paranoia and distrust throughout the films, when in the novel he only begins to lose his perspective in Mordor, where the Ring's pull toward Sauron is strongest. And two elekks for Sam? Seriously? Tolkien's single one going rogue would have been a better dramatic effect...that's why he did it.
No matter how Jackson claims in interviews that he wanted most to be "true to Tolkien's vision", I can only conclude that he never trusted Tolkien's ability to set the right tone or scene. There are just too many changes, from the profound to the perplexing, to call it Tolkien's work any more. It's not fan fiction either, since it's a reworking of the original rather than an ancillary story. At best, it is a gorgeous visual illustration of Middle-earth, but that's never nearly enough excuse to get permission to portray a masterpiece. What Jackson did was take Tolkien's characters and world and rewrite the story the way he wanted it to be, and that's not something I can condone. So, while I'd love to see The Hobbit on the screen, like I said, I'd rather it not be done than to be given the same treatment.
And I've heard that Jackson wants to film The Silmarillion as well. Please, movie gods, for all that is still good in the world, don't let that happen. Christopher, if you're still cognizant, don't sign away those rights to anyone while the blockbuster still rules cinema, especially not Peter Jackson. Those stories deserve a kind of film making that hasn't been invented yet and a filmmaker who will not shy away from making it exactly as dark as it should be. The Silmarillion should not be set within a single two or three hour frame, or even a trilogy of three hour films, but each chapter given all of the time and scope it requires, and forget distributorship. If it's done right, it would be at least twenty-four hours altogether, give people chills just to see the name on the first trailer, and be the biggest fucking thing in the world. If it's done by Peter Jackson, it will be a cgi dagger in my heart.
EDIT: I looked up the relevant passages in LotR, and here's what it gave me about the balrog: "His enemy halted again, facing him, and the shadow about it reached out like two vast wings." Then, more conclusively, "It stepped forward slowly onto the bridge, and suddenly it drew itself up to a great height, and its wings were spread from wall to wall..." That's enough for me in that nerdy debate. Whether elves (and hobbits) had pointy ears? Unless Tolkien mentioned it in interviews, there's no telling. From all that I've read, he rarely described anyone in that detail. Gimli would not have been so clumsy or slow, though. Dwarves were supposed to have great endurance in running and savage prowess in battle (even against elves, which is saying something).