We may cite lot of things at each other, and both sides may have their points, but the gist of the debate seems to come down to the following:
1. TH was not originally conceived by Tolkien as part of Legendarium
2. Later (and as soon as chapter 3, I'd argue, even if it was merely for 'depth'), Tolkien changed his mind and made some effort to incorporate it into Legendarium.
Both statements are true, and
davem is perfectly right in pointing out clause 1 at us, but than it is a question of 'authorial intent' or 'reader's freedom' we have our noses pressed against.
I believe that 2 has supremacy over 1 in this case.
davem seems to hold the opposite view, that is, 'Tolkien made a mistake in shifting his positon from 1 to 2'.
For additional support to my own view, apart from things already said, it may be stated that many things which form essential part of LoTR were born in The Hobbit: the Ring and Gollum to name the most important.
The very geography of LoTR and its much discussed discrepancies with that of the Hobbit is there at all thanks to TH. There would be no Erebor, no Dain Ironfoot and his conversation with Sauron's messanger, no Gimli in the fellowship, no Galmdring of Gondolin in Gandalf's hand on the bridge in Khazad-dûm, no elated legend of Azog and Thrain if some things were not originally parts of the Hobbit.
True, it is not
essential to have read the Hobbit to understand and enjoy LoTR, but I think LotR would be poorer if there were no TH (leaving aside the obvious fact there would be
no LoTR at all if there were no TH)
The very choice of names for the dwarves and Gandalf points in opposite direction - TH was
less of a fairy tale from it's very beginning, than, say, Roverandom.
Fantasia? Let it be termed so, but if
fantasia takes part there, it is part of it.
Apart from all
elaborate explanations we keep coming up with to davem's dissatisfaction

, the most perfect one comes out of LoTR itself (I doubt it was conciously put in there, but it is the best):
Quote:
It became a fireside-story for young hobbits; and eventually Mad Baggins, who used to vanish with a bang and a flash and reappear with bags of jewels and gold, became a favourite character of legend and lived on long after all the true events were forgotten.
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Do you expect much of 'Mad Baggins' type of story? Following Sam, I can imagine fire-side storyteller groping for Troll-names and coming out with Bill. (
You may point out that 'both TH and LoTR were written down as parts of the Red Book', and thus disarm this theory, but than, I'll retreat back to authorship: it is Mad Baggins who wrote down his own authobiography, not a college of writers including half-transparent Ring-bearer (who have 'grown wise' according to a Maia), half-elven wiseman and another Maia). Besides, if you do point that out, you lose - if they both were parts of the same imaginary book, they are both parts of ME
Yet, kidding apart, the real question is, did Tolkien make a mistake? However I may respect
davem (and Flieger, whose work was introduced to my attention and brought me much enjoyement thanks to aforesaid davem), I believe
they are making a mistake, not Tolkien
As I never was one for democracy in matters of opinion (that is, majority does not have casting vote here), I'm forced to conclude that this particular debate comes to a draw and both sides stand unconvinced, though.