FOUND: Teacher Bilbo
Looking for a female Bilbo fic. It's an AU. Obviously. Bilbo was at Eren Lund if I remember right. She was living with one of the dwarves, I think Dis or possibly Dori, and she was working as a teacher. Though I think that ended up being secondary for whatever reason she was there. I remember she found out Dwalin couldn't read and she started to teach him, along with Bifur, how to read and write. I think she actually wrote a dirty story to help Dwalin learn how to read and the Scribes Guild got it somehow or someone else started publishing copies of it.
Update: Well, thought it might be Word Blindness by madam-faust. But it wasn't. So back to the drawing board.
FOUND! It is Bilberry and a Whole City Full of Dwarves by Redone. It does appear to have been abandoned before completion though.