Tolkien as 'translator'

How thoroughly realised was Tolkien's fiction that he was the "translator" of "The Lord of the Rings"?

Very thoroughly indeed. The scenario was that "of course" hobbits couldn't have spoken English; rather, they spoke their own language, called Westron (but often referred to as the Common Speech). Tolkien "translated" this language into English, which included rendering all the Common Speech place-names into the equivalent English place-names. The object of the exercise was to produce the following effect: names in the Common Speech (which were familiar to the hobbits) were rendered into English (in which form they would be familiar to us, the English-speaking readers); names in other languages (usually Sindarin) were not changed in this way, and thus were equally unfamiliar to the hobbits and to us. Since the story was told largely from the hobbits' point of view, that we should share their linguistic experience is a desirable result (especially for Tolkien, who was unusually sensitive to such matters).

In portraying the linguistic landscape of Middle-earth he carried this procedure much further. The main example was his substitution of Anglo-Saxon for Rohirric. The rationale was that the hobbits' dialect of Westron was distantly related to Rohirric; therefore, when hobbits heard Rohirric they recognized many words but the language nevertheless remained just beyond understanding (RK, 65 (V,3)). Thus, Tolkien attempted to further duplicate hobbit linguistic perceptions by substituting that language of our world (Anglo-Saxon) which has (more-or-less) the same relation to English that Rohirric had to the hobbit version of Westron.

There were many other nuances in the intricate and subtle linguistic web he devised (always, he carefully explained, in the interests of reproducing the linguistic map of Middle-Earth in a way that could be easily assimilated by modern English-speaking readers). Thus:

a) Archaic English roots were used in those Common Speech place-names which were given long before the time of the story (e.g. Tindrock, Derndingle; etc.).

b) Some of the Stoors (who later settled in Buckland and the Marish) dwelt in Dunland at one time (Tale of Years, entries for TA 1150 and 1630 (RK, App B)); the men of Bree also came from that region originally (RK, 408 (App F, I, "Of Men", "Of Hobbits")). "Since the survival of traces of the older language of the Stoors and the Bree-men resembled the survival of Celtic elements in England" (RK, 414 (App F, II)), the place-names in Bree were Celtic in origin (Bree, Archet, Chetwood) (see also Guide). Similarly, the names of the Buckland hobbits were Welsh (e.g. Madoc, Berilac).

c) Among hobbits some of the older Fallohide families liked to give themselves high-sounding names from the legendary past (an example of hobbit humor). Tolkien represented such names by names of Frankish or Gothic origin (Isengrim, Rudigar, Fredegar, Peregrin).

These matters and much else is explained in detail in Appendix F of 'Return of the King'.