Yes, some of the dialogue and tone suffered. Gimli, for example, made into comic relief worked for entertainment but distorts the character. Similarly, the addition of self-doubts to Aragorn and an impulse to resist his destiny, the manufactured melodrama of Elrond not supporting Aragorn's relationship with Arwen, and of Arwen and Aragorn giving up on each other, distorted those characters. Similar distortions were made to Sam and Frodo.
It's hard to say whether a more faithful version will ever be made. Obviously making films this big is a huge logistical challenge.