I'm in the midst of reveling in a book called The Lord of the Rings; The Art of The Fellowship of the Ring. It's filled with the paintings and drawings that went into the design and actual creation of sets (real and computer generated), the costumes, the jewelry, the armory, the creatures.

It's interesting that in many cases there were/would be no sets built, and the actors did their stuff in front of a blue screen, and computer sets were added. Hobbiton was built "real", yes. Indeed, it was built a year or so in advance of when it would be needed, so that sodded roofs and so forth could grow in by the time of filming.

Dave Oesterreich