Of course not all the important characters can be really tall, but this is just a splash of realism on Tolkien's part. He wanted most of his leaders to stand out and inspire awe in his followers. What simpler way to inspire awe than in being visually outstanding? It's the same with beauty.
Concerning Hobbits: Yes they saved the world, but they didn't lead the world. They were jokes, cause for laughter, among the Men of Middle-earth until their ignorance was demonstrated. So the default position is shown to be disrespect. The Hobbits had to save the lives of the tall folk in order for their worth to be obvious (to those tall folk). Think of Pippin at Minas Tirith: the very notion that this tiny little guy could help our city!
Generally, heighty is seen to be mighty. (Love the thread title, by the way.
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