Celebrim, I often agree with you on many things. But here, I think you are quite wrong about Peter Jackson and Tolkien in several respects.
Fire away.
1. Our representatives, the common people, in Lord of the Rings, are the hobbits themselves.
Well, yes and no. While its true that the hobbits represent simplicity, three of the particular four hobbits with which the story are most concerned are drawn from the landed gentry. Between them Frodo, Merry, and Pippin represent most of the aristocratic and monied interests in Hobbiton and are themselves uncommon for many reasons. Frodo is after all 'the best Hobbit in the Shire' and is conversant in Elvish and versed in all manner of lore and wisdom. They are sufficiently uncommon to be considered wierd, and were they not noble in the social sense they probably wouldn't be able to get away with their ecentric mores and behavior. To actually get down to the level of the common hobbit, the common man as it were, we have to consider more the opinions of the Gaffer, Ted Sandyman, or Odo Proudfoot than rarified individuals like the heirs of the Tooks and Brandybucks - to say nothing of the heir of Bilbo.
Sam straddles the gulf between the truly common and the truly noble and respresents something of an idolized commoner.
For instance, Sam's realization that they are part of a much larger story that had began long, long ago, that was also filled with seeming hopeless moments.
Sam and Frodo's discussion of the meaning of stories on the pass of Cirith Ungol is the real heart of the story, but by no means is Sam's profound realization of his place and purpose in the universe - literally as it were discovering the answer to life, the universe, and everything - meant to be the common and ordinary understanding of life. Sam is standing on a high place at that point. He's not seeing the story from ground level.
While you want to say Ioreth embodies the 'ignorance' of the common people (in her misunderstanding of true heroism), despite what may be called her 'ditzy' character, she also represents the solid, grounded wisdom of the people (also evident when Sam resists the Ring's call to power) when she recalls "The hands of the King are the hands of a healer,"
First of all, I don't at all deny that Ioreth embodies both the wisdom and foolishness of common sense - just as Sam himself does. She certainly comes off better than the learned academic in the scene. As I said, she serves several roles in the story. However, I do think that she is one of the stories ordinary voices. She's actually quite possibly my favorite character in the story, so by no means think that I'm being insulting to Ioreth. She's so real and drawn with so much affection and compassion by Tolkien.
However, I think Tolkien doesn't believe in the "solid, grounded wisdom of the people". There is certainly no simplistic praising of the proletariat here. I think the commentary he's making on wisdom through characters like Sam, Ioreth, and Beregond is more complicated than that. Sam for example has far too much faith in his "hobbit-sense" for his good, and in many cases his confidence is not born of wisdom but of ignorance. He likewise has the arrogance of the unlearned in assuming that anyone with learning must be somewhat of a fool. But on the other hand, Tolkien doesn't simply back his own academic social classes biases either, and instead does really praise the common folk as a source of practical wisdom. Indeed, I can't help but think to some extent Tolkien has read his Erasmus and is not praising folly. Certainly, that 'fool of a Took' tends to do things that are stupid, but which work out in the end.
Even though Sam is only 'half-wise', that still puts him up above the level of common understanding, and by the end of the story he is 'full wise' having come by his wisdom the hard but sure way - by making mistakes and learning from them.
Ioreth, bless her heart, doesn't strike me as someone who is so teachable nor so humble.
If anything, Ioreth's take on events represents how legends are made...
I don't at all deny that Tolkien is commenting on myth making in general here, but I think you do him a disservice by not examining the particular sort of myth that is being created in the light of the major theme of the story. Tolkien is not a perfect writer, but he is very subtle in his thought and he seldom does anything with only a single purpose and in my experience he seldom has failed to think through the consequences of what he writes. Thinking that he was being shallow and has hindered my understanding of Tolkien too many times where I didn't take a second look at something until the third or fourth time I read it.
"splintered fragment of the true light."
I liked Pearse and Flieger's writings well enough, and Flieger in particular did a great service by finally putting the rest of academia on more of the right track and ended the era of truly profoundly wrong-headed academic writing on Tolkien where someone could with a straight face claim LotR was an allegory of WWII, but so far I don't think I've read an academic who gets Tolkien better than Wood. I think that one of the problems academics have when they tackle Tolkien is that they are trained to start looking for allegory that constructs some clear narrative behind the plain narrative. Tolkien may use the fragment of light in Galadriel's glass to represent certain things, but that doesn't make the story allegorical or simply followed by looking for symbols, or that his symbols are meant to mean one thing only. Tolkien uses symbols the way a painter uses color, but Tolkien isn't a modernist - the symbols aren't the meaning of the work.