I'm inclined to agree with McGrath, species differentiation is usually based upon, whether or not, the crosses of supposedly separate life forms can produce viable offspring which in turn are able to reproduce.

Morphological differences in higher species can vary tremendously, as in dogs for example. Even the wolf and the dog have now been relegated to the same species, as they do produce viable offspring unlike donkeys and horses.

I would think that relegating "Hobit man" to a separate species should based upon the DNA testing that was mentioned in the BBC article. That said, we'll probably never know if Frodo had sex with a human and went on to have grandchildren.