Ian Holm is a wonderful actor, but he is now 76, and would be 77-78 during filming. That’s even significantly older than when they were filming LOTR. I don’t think it would work. The movie audience would expect a Bilbo like unto the Frodo they saw. I vote for James McAvoy if he is available and wants to do it.
I do like James McEvoy, and he’d be fine, if he’d do it! He may not mind the ‘fantasy’ aspect of it, especially since he must know it will be a HUGH success.