Welcome to the Downs, Althern! You're starting off with an interesting question, and I hope you get many responses. I agree that limiting the millions of imaginations to one picture would be a shame.
I read the book first, many years ago, so my inner images were there first. Some of them coincide pretty well with the movie characters - Gandalf, Bilbo, and Saruman, to mention those that occur to me right away. Some of those which are different don't bother me - Boromir was excellent, Gimli too, and so was Sam, for example - oh, and Gollum, of course! Éowyn and Éomer are fairly close, though not quite. I accept most of the others in the context of the movie, though they don't fit my images - Frodo, Aragorn and the Elves, especially Arwen, Elrond, and Galadriel.
As to locations, the Shire and Bag End are spot on, Rohan slightly different but fine, Helm's Deep good, Minas Tirith different but OK, Rivendell different but nice too, Lothlórien too different from my book image for my taste, the tower locations all pretty good.
Question is of course, will I be able to keep those images separate when I read the book again? I hope so!
There's a similar topic on the Books forum, which you might like to read:
Still forming your own images of Middle-earth? Enjoy!
<font size=1 color=339966>[ 9:07 AM January 28, 2004: Message edited by: Estelyn Telcontar ]