The first script will be finished and delivered in about three weeks. Peter, Guillermo del Toro, Fran Walsh and Phillipa Boyens started work three months ago after lots of time trying to figure out how to make the film work. They weren't sure whether to squeeze The Hobbit into one film and do a bridge movie with The Lord of the Rings or to give The Hobbit two movies. Jackson said they realized that even at three hours they would lose too much of what makes The Hobbit The Hobbit. On top of that they wanted to embellish some things and they wanted to add extra narrative for Gandalf as he deals with the growing threat of Sauron.

He did caution that since the script isn't done there isn't a budget, which means there isn't a green light, which means there isn't a start date, which means no actors have been approached. While he wants all the major players from The Lord of the Rings who would fit in this film back, there's been nothing official.

Since they haven't finished the first script they haven't begun the second at all, but they figure that once they get the budget for the first they'll have an idea what the second will cost and they can do pre-production at that time. Right now they're eyeing release dates of December 2011 and 2012.

Jackson is keeping all 13 dwarves, but that number of characters creates problems. They're going to pick four or five dwarves to make leads and keep everyone else in the background.

Are they still planning on adding the 'extra' stuff to bridge the gap between the Hobbit and LOTR?

I always said the Hobbit was too much for 1 film.