I always thought the book did not have a happy ending but the characters did live happily ever after. How so? well, here is the thing
First of all, even though the ending of the story is... perhaps ten pages long? I can't quite recall, but even if it was a whole chapter... it is still significantly shorter than the rest of the book, even though an approximate equal amount of time goes by from Bilbo's 111th birthday to the destruction of the ring. So the Fellowship does indeed last a little longer than that (There is no reason to believe that they did not keep in touch with each other, even if they did not have e-mail)
Then Frodo leaves for Valinor and it's a sweet and sour moment. We are all happy for him and at the same time we feel the pain of the hobbits. Let's not forget they are loosing Gandalf, and Galadriel too. Sam is probably the worst off as he was the closest to Frodo, the one (besides perhaps Frodo himself) who loved elves the most and they all loved Gandalf.
Still, Merry Pippin and Sam as well as Aragorn, Legolas and Gimli are probably in touch with each other, maybe even visiting from time to time. On the long run, I would think that they came to terms with the loss of part of their fellowship because they ought to have known it was the best for them.
Regarding the end of an era, I don't think it was up to any of the characters to understand that. We understand it, maybe Gandalf did as well... but it was the time they were living at and it is easier for us to see things in perspective than for them.
Which brings another completely different topic.... the ending is definetly sad for us, because of many reasons.
First of all, it's the end!!! Lord Of The Rings is over!!! It's that bittersweet moment in which we realize that no matter what we read it will not be exactly the same. As Lhuna said, if it was up to me, I'd start a new adventure for the Fellowship... and another, and another. But Tolkien was smart enough to realize the story was over and that trying to stretch it any further would have been like the effect the ring had on Bilbo... stretched but not growing.
Second, as I said before, the ending is far shorter than the rest of the story although quite a bit of time comes by. For us readers, everything is still too fresh in our memories, the great adventures and the ever-lasting friendship. For the characters, instead, some time has passed (now I can't recall how much) and they have probably been able to adapt to their new situations. After all, life goes on.
On the long run, they will all understand that each has been given what is best for him and so be happy.
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