This from Worstpreviews:
"What we've done over the years is discover a lot of interesting actors," said Jackson. "So if you start looking and auditioning seriously, it's amazing what incredible talent you'll find out there."
The rumor mill has spat out a few names for Bilbo but one popular one in particular is James McAvoy. To which Jackson states: "Apart from Ian McKellen, we are not really offering any roles to anybody until we've done a casting sweep."
Jackson has gone on record saying that he does not feel any pressure to cast a known actor "(These movies) have never been a star-driven vehicle. The star is (author J.R.R.) Tolkien and the world he created," states Jackson. "We are not under any pressure. We want to find the right people. Casting someone to portray a hobbit is not as easy as you might imagine. [We've] got to find the right people to play them, the right humans to translate these characters."
Agreed Peter. Just make it epic.