Interesting topic.
I have to say that all the times I've read it, I've read it all the way through, from start to finish. Nothing exciting. It's mainly because the last two times I've read it, I've read it out loud and I couldn't very well skip around, could I? But next time I read it, I'm going to be reading it to myself, and depending on how I feel, I think I'm going to skip from Book 2 to Book 4, and there to Book 6, stop at the end of Mount Doom and then go back to Book 3 and read what I didn't before.
But...I've not done that.
And at other times, I have just refered to it as an encyclopedia, as you put it.