I posted about my desire to run a D&D game set in Middle Earth during the 1st Age, when the great kingdoms of the Noldor and Sindar, plus the allied Houses of the Edain and occasionally the Dwarves faced off against the monstrous hordes of Morgoth.
There are some changes to the rules necessary to better simulate the feel of Tolkien. As my buddy Dave mentioned, Elves especially are a LOT more powerful--or at least the ones that play any sort of part in the stories. Also, there are lots of monsters that don't fit the bill, and the big problem of the flashy spells like Fire Ball and the like.
Well, here are a few ideas (mostly things that have been said before by others on Dragonsfoot or other places like that, but they're worth repeating):
1. Stick to the 81 Moldvay/Cook/Marsh BX books. Humans top out at 14th level, Dwarves at 12th, Elves at 10th, and Halflings at 8th.
2. Magic-Users are a monster type--servants of Morgoth, not something PCs can use.
3. Elves use Cleric spells rather than M-U spells, but retain their normal spellcasting ability (1 spell at 1st level).
4. Clerics lose their weapon restriction, and are used as an 'Elf Friend' class--Humans with Elven upbringing (but are restricted, like Elves, to 5th level spells at best).
5. Restrict monsters to things that appear in Tolkien's writings, plus giant animals and insects.
I think these five rules could actually do the job nicely. Certainly most Elves are more powerful than most Humans, but this can be easily modeled using the Normal Man rules, whereas every Elf is at least a 1st level Character. Many Elves that will be encountered will be higher than 1st level (or a single high level Elf will have many lower level underlings, similar to the way an Evil High Priest gets some lower level flunkies). There are a few rare exceptions where Humans gain more power or ability than any Elf--Turin and Beren are the best examples.
Plus, without the Magic-User available as a PC option, that cuts down quite a bit on the power levels Humans can attain (without serving the Enemy).
So in other words, PCs start low level in a world with plenty of high level (mostly Elf) characters, and need to work their way up. If they do, the lucky and well-played Humans can potentially outclass the great and powerful Elves, but it will take a long time and a lot of work.