I apologise if this has already been raised in the thread -- I did go through all the posts, but I admit that I perhaps may have, well, skimmed a bit (the volume is a bit daunting!).
Seems to me that by focusing exclusively on the visual effects that we are in danger of neglecting that other at-least-equally-important component, sound effects. A great looking balrog is cool, but if he sounds like an engorged hippo it's going to be silly. The fact that they got the sound of things so dead to rights in the movie was, for me, the real triumph (the balrog, for example, was composed of sounds that they sampled from rocks and stones dragging along concrete or smashing against one another). Other sounds that I think were nothing less than brilliant were the cry of the Nazgul (an important component of which was Fran Walsh screaming her head off), the whoosh of arrows and the reproduction of the Ring's "voice."
I bring this up because sound design is easily the most overlooked (pun intended) aspect of special effects in movies, but one that is absolutely critical. The film's ability to come up with roars that sound like a balrog's roar are, I think, testimony to how effective film can be. It is one thing to imagine a balrog, but it is altogether another to imagine a balrog's roar. That's because it is the
image-ination -- the ability to create images in our own minds -- that books appeal to. Very few people have (to coin a word)
audimation, or the ability to 'imagine' a noise that they have not heard before.
That's where I think the film is able to transcend its own limitations as a visual representation of a written book, and bring something to the story of Middle-earth that simply cannot exist any other way. Tolkien might have attempted something like "The balrog's roar was as an avalanche of stone" but that is merely simile: the balrog sounds like something else. Only in film is the balrog able to sound like a balrog. When we see a visual effect, we are thinking "that cgi sure looks like a balrog" but we do NOT think "that audio-sampling of concrete bricks, dubbed over with mica and shale striking one another and amplified in the high band sure sounds like a balrog", we think "that's a scary roar!" or even just "

" .
Sound is in some way more immediate and believable than sight, and so I think it is more important even than the visual effects. Lucas knew this (just close your eyes sometimes and listen to Star Wars) and PJ figured this out too (again, close your eyes for the Bridge of Khazad-Dum sequence, or for Lothlorien; you won't believe your ears). It's because people aren't paying conscious attention to the sound that it works, I think -- we aren't analyzing it, so it sinks in. I think that's the real magic of movie effects, and like all good magic it works by misdirection. Show us a great looking computer generated monster and get our attention wholly on how it looks, then, while we're looking at that hand, bring in a completely convincing sound effect that we accept uncritically, almost unconsiously, and then *poof* the effect becomes real. Try the converse experiment and watch the effects heavy scenes with the sound entirely off -- you will not believe how much is lost.