If you really want to know what Middle-earth is based on, it's my wonder and delight in the earth as it is, particularly the natural earth.
Middle English is an exciting field - almost uncharted, I begin to think, because as soon as one turns detailed personal attention on to any little corner of it, the received notions and ideas seem to crumple up and fall to pieces - as far as language goes, at any rate.
I dislike Allegory - the conscious and intentional allegory - yet any attempt to explain the purport of myth or fairytale must use allegorical language.
Myth and fairy-story must, as all art, reflect and contain in solution elements of moral and religious truth (or error), but not explicit, not in the known form of the primary 'real' world.
The proper study of Man is anything but Man; and the most improper job of any man, even saints (who at any rate were at least unwilling to take it on), is bossing other men. Not one in a million is fit for it, and least of all those who seek the opportunity.
Do not meddle in the affairs of Wizards, for they are subtle and quick to anger.
Hobbits are an unobtrusive but very ancient people, more numerous formerly than they are today; for they love peace and quiet and good tilled earth: a well-ordered and well-farmed countryside was their favourite haunt.
The original 'Hobbit' was never intended to have a sequel - Bilbo 'remained very happy to the end of his days and those were extraordinarily long': a sentence I find an almost insuperable obstacle to a satisfactory link.
So comes snow after fire, and even dragons have their ending!
If more of us valued food and cheer and song above hoarded gold, it would be a merrier world.
The wide world is all about you: you can fence yourselves in, but you cannot forever fence it out.