Tolkien takes a lot of ret-conning because he has a big, elaborate setting. If it is to be tied in with Lewis's setting (as Lewis himself tried to do even before Lord of the Rings was published), and with modern geology and paleontology, some major additions have to be made.
On the other hand, Tolkien's Middle Earth is set long ago and so has little tie-in to a modern setting. Because of the lack of tie-in, much of the ret-conning can be ignored for much of the time; it's enough that there are still some remnants of some Tolkienian races about.
Taking Tolkien to be as true as possible:
First, keep in mind that Tolkien himself says he reports elvish myth. We need not take the Red Book as infallible.
Tolkien clearly falsified, bungled, guessed at, or fudged his maps. Europe never looked like that, nor did anywhere else. Middle Earth is ice-age Europe. Much of Middle Earth's geography is now drowned in the risen sea:
Hobbits are a now-extinct sub-species of human, long since absorbed into the human mainstream. Races of elf/hobbit hybrids are responsible for some sightings of child-sized fays.
Elves are fays called by the Valar with divine sanction. Elves "belong" to the Valar in a way Adamites do not. The Call of the Valar was not merely an invitation to escape Middle Earth; all fays were supposed heed it and come to them, to be Eldar.
The Eldar are rarely and fleetingly seen on Earth now. There may never have been more than a few hundred of them. The Avari, who refused the call, are responsible for most fay sightings in folklore. They are also rebels against the Valar, however confusedly or unknowingly, or descended from rebels.
Orcs are corrupted elves. Now that Morgoth and Sauron no longer have free reign, orcs are in various degrees of recovery and are responsible for most grotesque fay sightings.
Dwarves are pre-Adamite fays uplifed by Aulë, initially without divine sanction. Dwarves have by now radiated into a number of races. They are responsible for the more mundane fay sightings.
Those who sail from the Grey Havens, that is the Eldar and a few others, leave "the circles of the world" behind and Tolkien specifically describes their ships rising above the sea, into the sky. Going where? They have gone to a planet in the Perelandra system, though not to Perelandra itself. We may as well call this planet "Eldamar." The ships that sail to Eldamar leave our solar system through a gateway at a point near Venus, which explains the elvish reverence for that planet.
The Valar are the "ambassadors" of the Oyeresu, their deputies, described by Ransom in the Space Trilogy. They are therefore a class of eldila. So are their servants, the Maiar. The Valar also have djinn and, of course, elves in their retinues, though they do not govern all of either race.
Melkor, the evil Vala also called Morgoth, is the same as the Bent One of Lewis's Space Trilogy.
Dragons are the remnant of the Serpent Folk, sapient archosaurs who lived and went to glory or something around the end of the Mesozoic; a few came back. They are now divided into three main clans: the Lung in eastern Asia, the Nagas in southern Asia, and the Dragons in Europe and western Asia.
The more obscure creatures from Tolkien's legendarium—the stone giants from The Hobbit, the Barrow Wights, and a few others—are probably djinn or jann in most cases.
Numenor, which is of course Atlantis, was Spartel Island (now Spartel Bank) in the Straits of Gibraltar. It sank about 23,500 years ago. Plato's Atlantis was a successor that sank around 10,700 years ago.
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Copyright © Earl Wajenberg, 2010