As Valier said, beauty is in the eye of the beholder.
Liv Tyler is definitely a strange kind of beauty, who cannot match everybody's taste (she does quite match mine). But I think it was exactly this kind that Peter Jackson looked for. Whether you think Liv Tyler, Hugo Weaving or Orlando Bloom are beautiful or not, they do not look like everyday people. And nothing would have been more fatal than casting an "ordinary" beautiful person to play an elf. They should look different - to make the otherworldliness visible, which seems to be very difficult to catch for a film-maker otherwise.
edit: cross-posted
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