replying to my own post...uhg. But Peter Jackon offered this to EW regarding the Hobbit:
Peter Jackson speaks on the Hobbit:

Let's switch gears to The Hobbit. If you signed on to direct it, you'd be working with New Line again, as well as MGM, yet you're still in the process of suing New Line over profit issues on Lord of the Rings. Doesn't that affect your relationship with New Line overall?
No no no, I'd love to make another film for New Line. And certainly The Hobbit isn't involved in the lawsuit. Bilbo Baggins doesn't work for the accounting department of New Line, and I certainly don't hold him to blame for any of our disputes.

Did you actually do any preproduction for a potential Hobbit film during LOTR, or would you have to start nearly from scratch?There would be a reasonable amount [still] to do. There are a couple of locations in The Hobbit that are shared with Lord of the Rings. Hobbiton and Bilbo Baggins' house obviously appear, and Rivendell, where the elves were in Fellowship of the Ring, also plays a part. We've still kept the miniatures of Rivendell in storage, and the set of Bag End, Bilbo Baggins' house, has also been saved.

The larger version of the Bag End set the one big enough to make Elijah Wood look hobbit-size is on your own property now, isn't it?
Oh yeah, it's great. It's the guest house. I guess if we needed it for the movie, we could just go and film in it and it'd be fine.

Are your wheels turning about how you might approach adapting The Hobbit even though the prospect has only just come up?Reading about it on the Net, what interested me is the fact that [MGM is] talking about doing two Hobbit movies, which I thought was a much smarter idea than one. Not just for obvious financial reasons for the studios, but from a storytelling point of view, because one of the drawbacks of The Hobbit is it's relatively lightweight compared to LOTR. I mean, LOTR has this epic, rather complex quality to it, and The Hobbit, which was written some 10 or 12 years earlier by Tolkien as a children's book, is much more juvenile and simplistic. If they're seriously thinking about doing two, it makes it more interesting, because it allows you to expand The Hobbit. There's a lot of sections in which a character like Gandalf disappears for a while. From memory I mean, I haven't read it for a while now but I think he references going off to meet with the White Council, who are actually characters like Galadriel and Saruman and people that we see in Lord of the Rings. He mysteriously vanishes for a while and then comes back, but we don't really know what goes on. There's clearly lots of interesting politics happening concurrently with [Bilbo's] story, and doing two movies would allow you to explore a lot of those dark areas. You could make it feel more epic and more politically complicated.