Once again, I'm more surprised that people are surprised at the news Elijah Wood will be returning to Jackson's Middle-earth for The Hobbit films. Seriously, you'd think people would just expect this by now.
Quite how Frodo will fit in this version of The Hobbit is unclear, though at a guess, I'd suppose it would be in the form of a framing device. Jackson & co aren't thick enough to cast Frodo in the main story, so it must be that way. Perhaps it'll merely be in the form of a prologue/epilogue, or they'll go with a Princess Bride riff, snapping back to Frodo & Bilbo chatting throughout the two films.
It seems clear that Jackson wants to fit in as many of the characters from The Lord of the Rings as possible, so I fully expect to see lil' Aragorn too. I wouldn't be surprised if they had a scene with the whole Fellowship at some point, using cut footage of Gimli to stick him in without putting John Rhys-Davies through the makeup process again. Either that, or they'll give him digital makeup a la Gollum.
Speaking of Gollum, Andy Serkis has also been confirmed. I don't think there was any jeopardy of him not reprising his role. It looked troublesome for Ian McKellan, but he's confirmed too, and the fandom rejoiced, since even if you didn't take to his interpretation of Gandalf (though I'm fully aware I'm in the vast minority on that score), it would be ludicrous to follow up with a different actor. Ian Holm and Christopher Lee are still in talks, and I'd dearly love to see more of Lee's Saruman in The Hobbit, especially since he's playing a hero for once. Then again, considering how painfully unsubtle Jackson is, we'll probably have "hints" of Saruman's fall from grace with the nuance of a freefalling fire extinguisher sprinkled through the film.
I regret to note that Balin, my favourite Dwarf, has been cast, and it is not Brian Blessed. Instead, it's Ken Stott - a decision I find highly intriguing, and one I'm actually warming to. I really like his work on Rebus, Messiah, and his many guest roles, so to see him take the role of Balin is actually a move that I don't mind. Indeed, of all my problems with The Lord of the Rings adaptations, the casting (outside of Frodo being too young and Aragorn just not being "right") has been pretty solid. I still don't have any expectations for the films, but I can't deny I like some choices.
Still hate Itaril and her boyfriend. Dammit, Jackson/Walsh/Boyens, get a hold of yourselves!