Finished the Silmarillion, things still bother me though.

[Rumil]

Not sure when pygmies appeared, but there is a theory which maintains that their short, thin body type is ideal for their hot, wet ancient habitat, the jungles of equatorial Africa. The tall, thin Sudanese people are suited to their hot, dry climate while the short, plump Eskimos are suited to their cold climate. Most other people live in less extreme climates or have moved around a lot.

Anyway, Tolkien mentions pygmies in one of his oldest writings (n HoME somewhere), so there's the potential that they 'exist' somewhere in the South of Middle Earth.

I'm not entirely sure that Tolkien completely rejected evolution in Middle Earth. Admittedly, the peoples, animals and plants were created, but as the 'dwindling' of Hobbits after the 4th age shows, he doesn't rule out the possibility of change in these created peoples. Also there is the hint of selective breeding or 'un-natural selection' in Sauron's development of the Uruk-Hai.