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.
I can speak well of some changes, OTOH. The screenplay makes some excellent, tasteful edits to employ Tolkien's words in different places than they fell in the original, to good effect. For example, Gandalf's famous comforting words to Pippin in the face of Gondor's doom, about what lies after death. "A far green country, under a swift sunrise". Gorgeously poetic, and apropos for the moment and mood, but stolen from a prose description of a dream Frodo had while sleeping in the house of Tom Bombadil. In this case the writers did crib from a part which was edited out primarily for run time and pacing (Tom Bombadil and the Old Forest), and did so excellently, in a way which was consistent with Tolkien's tone and characters.