Like Varda, I thought the question was referring to the period before the Ring quest.
There is no doubt in my mind that Bilbo understood the basics about the Ring after the Council of Elrond. In the first drafts, Tolkien actually had Bilbo taking on the quest itself. Don't base your opinions on the movie. It was a great movie, but it wasn't the book!
Actually, I think when Frodo first left the Shire, even he did not have a clear idea how frightful the power of the Ring was. This was not made clear in the movie where Frodo was shown as a "victim" from the very beginning. In the book, it's a much more gradual process.
sharon, the 7th age hobbit
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