Ringer Mark sends a long this great tidbit from Variety:

As for "The Hobbit," Sloan confirmed that MGM was in advanced talks with Peter Jackson to make two movies based on JRR Tolkein's "prequel" to "The Lord of the Rings."

The first would be a direct adaptation of "The Hobbit," and the second would be drawn from "footnotes and source material connecting 'The Hobbit' with 'Lord of the Rings,' " he explained.

Sloan did not reveal when these projects might be ready to start shoot-ing. An MGM spokesman emphasized that negotiations with Jackson are still in progress, and that production isn't likely until 2008 or even 2009.

Read the full article. [Variety]

FOOTNOTE:
TolKIEN!!! TolKIEN!!! By the time "The Return of the King" came out, most journalists could spell his name correctly. Evidently it was too much to expect that might last. - Tehanu