Great idea Gwaihir. The way you get around the “cut and fashioned” part is interesting, and the theory put forward about “breaking of the world” is a good angle, even if I don’t necessarily agree. All very thought provoking. I like the whole arkenstone = silmaril idea a lot. I think it would be a neat added twist, but I lean toward thinking they are not the same jewel for reasons already given by others in this thread.
One other maybe minor point:
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The Lonely Mountain was certainly an extinct volcano; all alone in the plain, and with a distinct pointy summit.
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Now I’m not a geologist or anything, but I am under the impression that extinct volcanoes are not pointy. From Merriam-Webster Dictionary:
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CALDERA: a volcanic crater that has a diameter many times that of the vent and is formed by collapse of the central part of a volcano or by explosions of extraordinary violence
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Volcanoes that erupt violently don’t seem to be pointy. A volcano that erupted slowly would seem to have sloping sides. As the lava flowed slowly down the sides it would cool and layer up. And it would also have the crater in the top.
I guess this does not necessarily disprove that the dwarves may have mined and found a Silmaril, but it does seem to suggest Lonely Mountain is not an old volcano. I’m no volcano expert though.