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I suspect that some of the reason for the loss of 'magic' or wonder comes from the fact that we are all of us raised in a televisual age -- and are therefore extremely literate in the language and narrative structure of film: three acts, linear plot, character arch, field of vision, etc etc -- even if we don't know what these things are, we are so familiar with them that they are part of our viewing experience.
Part of the magical allure of LotR is that it is not 'really' a novel, but a tale told in a manner that is much older than modern storytelling techniques. It is presented in a way and according to rules that are not familiar, and so as we read it we are forced not only to move into the story, bu to adopt a way of thinking about story and narrative that is not the usual. This, I think, really makes the sense of being immersed in "another world" actually a reality, insofar as we have to give up the 'normal' or 'comfortable' ways we have of thinking about how our world is represented (i.e. in film or modern novels) and working within a wholly 'new' (to us) way of narration/creating an imaginary realm.
It's not just a new and imaginary world, but a new and imaginary way of thinking - the medium of film is just too familiar to replicate that.
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