As an aside, they didn't make it home from their mushroom-stealing afternoon until the end of the the series.
I think the "little people" in the article are more fairy sized or smaller. The BBC article linked to at that article says they were seen on dishes.
And in the hobbit there was already pipe smoking folks (although it's less emphasised probably because it was written as more as a book for children - or at least a child).
I mean sure, he wrote the lore sitting in trenches during a war, most of the universe was sorted out before he wrote _The Hobbit_ at all. I was, I thought clearly but I guess not, specifically referring to the Trilogy.