I think it is a children's book from beginning to end. Tolkein never intended it to be an adult story; that is what the LOTR is. If anything, The Hobbit was intended to be an introduction to the LOTR for older readers.
I thought Jackson made a pretty good fist of the film. The LOTR is a sprawling book with such an enormous back story, that it would have been almost impossible to transfer it fully to the screen. As far as the set design was concerned, well that was in virtually all cases exactly how I had imaginined the scene in my 'minds eye' when I read the books (some forty years ago).
The second book; 'The Two Towers' is quite rambling with the Fellowship having been broken: the remaining members going in different routes, and there are a lot of battles going on. Parts of 'The Return of the King' are almost mystical. Jackson was right to prune these out, though the meaning and implication of the Scouraging of the Shire is not correctly brought out, nor so the departure to the Western Lands by all the Ringbearers. Jackson was also right with the deletion to all references to Tom Bombadil and Goldberry: they come from an earlier time of Middle Earth, which is why the Ring has no effect on them. The viewing audience already had to assimilate much, so their appearence would have been too confusing.
I rewatched the extended DVDs last year - I really must get around to re-reading the book (Something I have said I ought to do since the screening of the first of Jackson's films!).