yeh it's pretty big news, entertainment-wise. He's awesome, one of my favorite directors. But, you can't really blame him. He's already been working on it for 2 years, there's no start date for shooting anywhere in sight until the mess with MGM is worked out- and who knows when that'll be- and he's got numerous other projects with his name on them that he pushed aside for The Hobbit that he could be making instead.
that's the question eh? I'd say go with someone kinda unknown but then they may not have the skills to do a good job with something of this scope and magnitude. I'd say Joe Dante, who directed Gremlins or Ivan Reitman. Or Diablo Cody. lol no jk. Sam Raimi I think would be do a good interesting take of it as well.