help me understand

[Knight of Gondor]

As I understand it, Tolkien was disappointed with his nation's complete lack of fantastic culture and history, myth, legend, etc., and decided to create his own for his country, even if it was fiction. It wound up corresponding to his works with Middle-Earth, and then I think Middle-Earth and eventually the events surrounding The War of the Ring took over. I'm not exactly sure how the Book of Lost Tales 1 & 2 can correspond, because they chronicle the story of Arda's creation from beginning pretty much to "current" times, at least the ancient times where our history takes over. Still, many of the legends survived and made their way into The Silmarillion, which was the final history product for Middle-Earth, which, I believe, Tolkien finally decided was actually a different world. I'm not exceedingly educated on the matter myself, but that is my take on it.