Please allow me to geek out a bit over Tolkien's strange and fascinating translation practices.
Even more than just the weird provenance of the hobbits' names as they appear in the book is how they interact with Tolkien's translation convention - the idea that Tolkien was merely translating the Red Book of Westmarch from the original Westron and Elvish tongues into English for modern readers. Tolkien had a complicated way of translating even Westron names into English. For instance, Meriadoc Brandybuck's name in Westron was Kalimac Brandagamba. "Kali" in Westron was a close pun (something the hobbits in particular were fond of) of a word meaning "happy," so Tolkien, in communicating that meaning, transposed Kalimac into Meriadoc.
As another example, the Brandywine River in the Shire was originally known as the Baranduin in Sindarin (an Elvish language), which then corrupted to Branda-nin ("border water" in Westron, since it was originally the eastern border of the Shire) in hobbit-speak, which further turned into Bralda-him ("heady ale," for the color of its water). Tolkien "chooses" to take the English translation from the alcoholic pun, while still keeping it phonetically similar enough to the Elvish Baranduin that we can see its descent - though it does lose the intermediate step until we are informed of it in an appendix.
Even further, he alters some colloquialisms of the Rohirrim and Gondorin to show their languages' relationship to Westron. Hobbits in Rohan are known as "hobylta," demonstrating that hobbits had more exposure to Rohan of old than they did to Gondor or other Edain (Elvish-speaking) humans. Gondor, relying still on the much more foreign Sindarin, calls the hobbits "perrinaith." (And even the names for hobbit is a stand-in word, with Tolkien borrowing Old and Middle English words and word-parts to construct them - in Westron, "hobbit" was in fact "kuduk," and "hobylta" was "kud-dukan.")
All of this illustrates not just how important the names were to Tolkien, but also how important it was that even his English "translations" capture the spirit, character, and descent of the languages. This is just one stance in a long and involved debate among translators on how to participate in translation - particularly as to whether and how to translate "sense for sense," as opposed to word for word. For Tolkien, this is especially important because, while he held an apparently quite extensive internal knowledge of the function and purpose of his languages, he never wrote the "original" Westron version of the Lord of the Rings, and so we have no way of gleaning any contextual meaning past what Tolkien includes in the English translation.
Modern scholars can debate for weeks over what passages in the Bible would've meant to a contemporary reader in the original Greek, and whether the King James or NIV gets the meaning right, but we can't do that for the Red Book. Tolkien instead does all the contextual assignment for us. Reading with this in mind makes a lot of the otherwise strange discussions on language and meaning in LOTR far more fascinating.
The Hobbit, according to Tolkien, was a children's version of a more serious historical account, and he intended to write a second version of The Hobbit that's more in keeping with the tone of The Lord of the Rings, but it was never finished. I believe this is what Peter Jackson is attempting to do (and successfully so) with the movie adaptation of The Hobbit -- a more grown-up version of the story that lines up seamlessly with The Lord of the Rings.
In spite of what Christopher Tolkien and other Tolkien purists have said, the Peter Jackson adaptations of the books only add to the depth and detail of what Tolkien was trying to achieve.