Rorate Caeli has a transcript up of a pair of talks by a very earnest, very well-intentioned priest on the works of Tolkien and Lewis.
Several brief comments.
First, the good father seems to be responding primarily to Joseph Pearce's somewhat hyperbolic treatment of Tolkien more than to Tolkien himself. I don't know (although it is, I suppose, possible) that Tolkien himself discussed his work in the exuberantly theological terms that Pearce has employed.
Second, insofar as Father wants to criticize Pearce's gloss, the criticism may be warranted. (I haven't read Pearce's works on Tolkien, simply seen bits, snatches, and summaries.) Middle Earth is manifestly not the actual universe and Iluvatar is manifestly not the one true God. Implying otherwise quickly, and for the reasons Father notes, places the basic underpinnings of the story at odds with the Truth.
Third, however, the fact that Middle Earth and its universe are not our actual universe seems to deflate much of Father's criticism. It is one thing, and quite an understandable thing, to criticize a work for presenting a false idea about the world. It is something else entirely to criticize it for presenting an idea at all about some other world. The Church has always condemned witchcraft and the occult because these things either present false explanations for the reality of our world or represent efforts to wield diabolical powers. But if we posit, simply as an exercise of the imagination, a world other than our own, in which the laws of nature and the the universe are not the same, and if the workings of that world involve what we would term "magic," we're not invoking the same set of underlying assumptions and errors that make actual attempts to invoke magic in this world quite wrong.
One could, I suppose, posit that it is impious to imagine things that do not exist or universes governed by beings other than the true God. There might be some validity to that position. But in its most extreme (but perhaps logically necessary) variant, it would clearly exclude all exercises of the imagination and condemn all fairy tales. It is likely that there were never such things as dragons: is it wise, under this manner of thinking, for Catholics to read The Golden Legend? This strikes me as Catholicism meets Common Core: a lamentable flattening of the scope of human thought, even beyond the condemnation of errors or limitations made for pedagogical reasons.
Four, Father criticizes Lewis's Narnian and Space Trilogy tales. The latter, indisputably, present a view of the universe that is almost certainly incompatible (at the very least) with Catholic teaching on the effects of the Fall. They are not rigorously theological books, although, like many of Lewis's works, they are fun and contain some food for thought. His criticism of Narnia is rather weaker, I think: there is no reason (that I have ever discerned in Catholic teaching, at least) that God should not have created multiple worlds, although (as Lewis himself posited somewhere in the Space Trilogy, oddly enough) the idea of a second incarnation is probably totally false. The idea that children (and these are children's stories) are going to be inclined towards scientific materialism by The Magician's Nephew or the occult by the presence of an anthropomorphized star in The Voyage of the Dawn Treader is a stretch at best. (How many children associate "fallen stars" with the diabolical?) The idea that it was monstrous for Lewis to present a race of gnomes in The Silver Chair as preferring to live in the bowels of the earth simply takes the cake: if the things were made to live there, it's just good teleology that they would want to return. Hell, after all, isn't actually in the earth's core. Narnia isn't a substitute for the gospels, or even a good grade-school Catholic religion text, but it's a shade better than Father gives it credit for, I think.
Is it a little disconcerting that hippies and freaks have always gobbled up Tolkien? Yes, one has to admit it is. But that fairly stands merely for the proposition that the books don't deserve to be canonized: they are not a great new Catholic myth. They're merely literature, literature that takes place in a world apart and in which virtue and vice are presented in, I think, a compelling fashion. We could quibble over the import of plot elements, but even getting to that insider-baseball level of detail undermines a thesis that the works are, per se, unwholesome.
One final note: Father's essay touches on a Catholic assessment of the Renaissance, and the dispute over whether or not the reclamation of pagan styles, forms, and works was an improvement upon or a degradation of Catholic medieval culture. Chesterton, who Father cites, was certainly correct in this regard. But that does not mean that the culture of classical antiquity is bereft of value to the Christian: Chesterton wrote to that effect at length in The Everlasting Man, and Father himself discusses Plato. Surely then, without giving them more credit than they are due, their arts and letters retain at least aesthetic and literary value that can be enjoyed in good conscience today.