OK, op I've read your posts but got bored on page 2 of the replies (sorry, I just can't stand Lord of the rings).
When I first read your post I thought, like others, that he's been a completely insulting knob and yanbu to be so upset. A quick re-read however and I've altered my opinion.
He's still been a bit of a knob, but not such a massive one, just insensitive.
Firstly, he said the turn off with hobbits was the big hairy feet and I don't think that's unreasonable! You don't have hairy feet so this is obviously not a comparison to you. Don't be so sensitive.
He should have been sensitive to the fact that you took up the hobbit nickname and did, to be fair, build an identity around it so it was a bit of a knobbish thing to say, particularly in front of you. Hardly crime of the century though.
It seems to me what he intended as a bit of laddish joke (and in this new light, a bit neggy let's be fair) in calling you a hobbit because of your height, you interpreted as an endearing nickname and....ran away with it a bit.
So, unless this also evolved into Lord of the rings roleplay with you as a hobbit and him as a ... whatever...then this is really a case of crossed wires and not a slur on your attractiveness.
It's reasonable to feel upset that something which came to be meaningful to you isn't to him, and I can understand that it felt like you being included in a special way in his interest, but don't get hung up on it.
Perhaps he has got a bit tired of the whole hobbit thing? There are also other ways to feel involved with his Lord of the rings obsession.
I think the sting possibly comes from what felt like a sweet, endearing expression of love between you both - and maybe made you feel protected- wasn't what you thought. One could argue that he didn't have to along with it and the fact that he did is perhaps in his favour (although again, makes his remark a bit knobbish).
So. Tell him he's a knob, explain why you feel hurt (about the meaningful, endearing aspect) but don't go around thinking he's not that attracted to you just because you're not the carbon copy of an imaginary, magical being.
Not even Kate Moss looks like an elf.