Sorry to digress as I often to do the start of a thread...
But I always imagined that tradition in the shire was that hobbits were buried in a suitable place - need not be together - for instance under a favourite tree or out in the orchard - in a loved glade or near a favourite turn in a stream. I didn't imagine that the hobbits would leave large gravestones, merely a small cairn of rocks or a small plaque, simply engraved. To me, this fits in with the wholesome nature of hobbits - rememberance should be in the head - let them rest in a favourite spot and remember them in your annals and geneologies - without marring the landscape with unsightly stones or graveyards.
That of course would been there were many graves scattered aroudn the shire - impractical considering all the digging the hobbits do - the fear of disturbing old bones would mar any gardener's plans.
Good point - i can't really find a place for the dead in hobbit society - cept in their annals of course. Probably better that Tolkien left it out.
Regards,
Ossë