I'm glad to see this bugs other people. The first LOTR movie was amazing. It didn't stray from the book, and was true to the characters. It made some minor changes that were necessary for the movie format, but that was about it.
But then it was like Peter Jackson said "I've proven that I can make a good adaptation to the movie - now I'm going to f*ck with the rest of the story/characters just to put my mark on it." Essentially, Jackson's ego took over and he decided that he knew more about story-telling than Tolkien.
For example: he completely destroyed Faramir's character who, while he had a smaller role, was incredibly important. When contrasted with his brother Boromir, Tolkien showed that humans have a hunger for power, but that we as a species are capable of seeing the bigger picture and the pitfalls therein. But Jackson wanted a cool battle scene with the wraiths, so he made up an entire (large) battle in Osgiliath, destroying Faramir's character to get there. That was unforgivable from my perspective, and completely ruined the series for me. I own the Fellowship of the Ring, but haven't watched the second two movies since they came out in theaters.
Unfortunately, having read your account of the Hobbit adaptation, I doubt I'll even bother seeing it now. What Jackson did seems cruel to me - to show that he could do it right -- he just won't.