Here are some suggestions I have for decorating with a Hobbit theme...
First if I may start with colors, I see soft yet warm colors. For example how about a soft sunny yellow room with red accents like pillows, vases, or red picture frames. Not any red but more of a deep warm red almost a rust but not too much so. In addition to that I see some wooden accessories like trunks and stools, bookcases all with wood tones. I would also add some white accents like window trim and perhaps some flowing curtains in a lighter but NOT sheer fabric. Some kind of soft cotton or textured fabric, maybe a tone on tone but nothing fancy. More of a soft country feel to it.
On COE there is a couple of pics that a woman posted with what I think is an awesome hobbit room! You really should check it out! She has used this cool window self sticking stuff to create a faux stained glass look. I love it! I know my local Home Depot sells something like that and if I get the opportunity will be applying that in my home at some point too.