I was mentioned above, there are halflings in the books, even though you don´t get to know about them all that much. LOTR references were indeed fun, but I appreciate there were only a very few of them. This game has its own wonderful enviroment and characters with amazing sense of humour, so in my opinion there is no need to combine these two fantasy settings together more.
Gnomes was a little incorporated into The Witcher 1, so to speak. But it made sense, since it was connected logically to the quests. Plus you were with your character in quite a big city. Seeing as the story developed in TW2, I don´t expect to see any gnomes on the way for the future.