If you have both Sim City 4 and Sims (original version) installed on your PC, you can download characters you've created in the Sims to live in your cities, so you really could have Sauron in Barad Dur and so on, if you have any custom skins downloaded (maybe from the site I posted the link to).
I'm not sure that cities with roads, power stations and skyscrapers are very Middle-earth, but if you used the cheat for money, you could create something appropriate by sticking to little towns and having farmers' markets and so on.
Anyone with a really good graphics card could conjour up some really funny scenarios to take screenshots from! Especially if they enabled the 'disaster' option on Sim City - which if I remember rightly includes a volcano?