The only "it's dead" news has been on this site. As far as I'm concerned, "on hold" means just that. If they resume later, fine. But if they don't, it'll be a disappointment that the Fellowship 9 couldn't be completed, but I'll be happy that I have what I have. As for the line failing to the point of being on hold, who can really say why? Most collectors are fickle...they want the newest thing and LOTR, by and large, is an "old" (read: no longer "cool") topic. Combine that with the slow release of this line (may be necessitated by R&D as well as rights issues?) and it was going to be a hard sell so long after the hysteria of the movies died down, except for us die-hards (many of whom had been invested in Middle-earth for over 20 years).
Agree with Dave that Hobbit license will go to Weta....at least for the statues, dios, and maybe even the weapons/helms stuff. IF any non-Happy Meal level collectibles stuff is going to be parcelled out, it may be for 12" or PF...and there's a lot of companies out there that's going to bid for the potential revenue if the movies have ANY merit and continue the fanbase. The fact that SS has the current LOTR PFs and 12" license, as well as having been closely associated with Weta at the beginning, might sway NL/Time-Warner...but am gonna just wait and see.