From the two TLDs, .world sounds like a great choice for something interest-related, like a small world that one can dive in temporarily to escape the real one. .life could also work, but sounds more all-encompassing, perhaps more suited to something that influences the majority of your life (like a profession or a life’s work).

Both hobbit and tolkien are good choices, like others have mentioned this can be used well to communicate the focus of the instance.

Good luck with the setup!

I like hobbit.world

Either sounds cool, I like hobbit.world better (tolkien.life sounds autobiographical), good luck with setting up an instance, if that’s what you’re doing.