As many will have already noted, there are a few things which deserve unbounded praise:
Casting. I'll admit I was skeptical of a few choices before seeing the movie. For example, Elijah Wood struck me as a bit of a lightweight for the important role of Frodo. But all doubts were laid to rest. And then some.
Elijah Wood's Frodo is all expressive eyes and innocence and reluctant hero. He carries the burden of the ring visibly, and it progressively adds to the emotional depth of his character. Acceptance, longing for what once was and can no longer be and sad courage play across his face when he realizes what he must do.
Viggo Mortenson as Aragorn exudes all the qualities of an Arthurian knight on the quest for the Holy Grail. He is a noble, brooding, haunted presence whose inner struggles are palpable.
Sean Bean as Boromir is unbelievable. Scratch that: he is beyond believable... he IS Boromir. Pride, envy, recklessness and the desire to bring honor to his name all simmer visibly just below the surface of his skin. And his struggles to resist the temptations of desire for the power of the Ring flitter across his face as almost physical pain. He is magnificent.
Orlando Bloom makes elves COOL. He can whip out an arrow and string them in his bow almost quicker than the eye. Lithe and slender, pretty without being effeminate, Legolas is a mythological statue come to life. I only wish he had had more lines...
Johnathan Rhys-Davies... how the heck was it possible to reduce such a big man to dwarfdom? I'm convinced they gave him a magic potion which turned him into Gimli, because at no point is his stature unbelievable. He provides one of the rare camp lines in the film (those who've seen it know what I'm talking about: on the stairs in Moria...)
Ian McKellan imbues Gandalf with all the wisdom and affection one expects in this character. Rumpled and wise, he is at once grandfatherly and majestic.
Hugo Weaving as Elrond is wonderful. His expressive brows, proud posture and knowing looks go far to flesh out his character. I did, however, keep waiting for him to throw on a pair of Matrix sunglasses... ;o)
Sean Astin does a sensitive portrayal of Samwise Gamgee. His loyalty, affection and depth of friendship are almost heart-wrenching at times, but never sink to treacly excess.
Billy Boyd and Dominic Monaghan as Pippin and Merry are the (somewhat) comic foil of the nine. Their characters cause all kinds of mischief but they portray obvious emotional and personal growth during the course of the film. The import of the quest their characters have undertaken sinks in, and as they eventually put themselves at risk to save Frodo, these actors make a believable transition from bumbling adolescent to responsibility.
Oh, and Christopher Lee gives an absolutely DELICIOUS turn as Saruman. His stage training shines through as he delivers lines in a stentorian voice... he quite makes you shudder when he's on screen.
Marton Csokas plays Celeborn, king of Lothlorien. His screen time was so brief as to barely leave any impression, other than elvish grace.
Cate Blanchett looks like a medieval princess, to be sure, a cross between the Lady of the Lake and a faery queene. Her character appeared almost so ethereal as to be not of flesh and blood.
Ian Holm IS Bilbo Baggins. EXACTLY as I had pictured him in my mind's eye.
Cinematography. In a word: stunning. Absolutely breathtaking. A seamless blend of New Zealand shots and special effects wizardry that was so lyrical and soaring, it pulls the audience through the screen.
Effects. Perfect. Perfect in that they did not hit you over the head announcing: ***HERE ARE F/X*** They gave credence to the existence of the Shire, Moria, Rivendell and all of the mythic locations of LOTR. Minor gripe was that Rivendell and Lothlorien looked like Myst/Riven brought to the big screen, a teensy bit twee for my taste, but that is serious nitpicking. The battle scenes literally blow one away. When Sauron's finger is slashed off, and a near-nuclear shockwave resonates across the battlefield, you feel knocked over in your theater seat.
All that being said, another thing stands out: the attention to DETAIL. From the individually crafted chain-mail shirts, to the effortless use of weaponry, to all the athletes cast as Orcs (nary a one was without a black belt), to the jewelry (leaf pins holding cloaks, the elvish crowns, the necklace worn by Elwen and given to Aragorn)... every tiny detail makes Middle Earth a REAL place, full of real beings we know MUST exist somewhere out of sight off screen.
Others have noted, and I will again: the Ringwraiths, the Black Riders deserve special attention. They are truly frightening. The menace of their flying black cloaks, the faceless evil... their enslaved souls bound by greed and lust for power... they BRILLIANT, absolutely BRILLIANT.
You CARE about these characters without feeling manipulated to do so. You feel your adrenaline rush at the battlescenes. And most of all... at the end, you want to scream: I can't wait another year for the next installment!!!
LOL! I was waiting for him to say "It's the smell! I can't stand the smell!"
Overall, I found the film to be very good and entertaining. Was it the best movie I've seen this year? No, that would be MEMENTO. Was it worth the price of admission? Absolutely. Was it the most visually spectacular film since the original Star Wars? Yes, I'd say so.
Will I see the next film in the series? Yes, I believe I will.