This letter has been expanded so we will spend the next several weeks posting and discussing it.
First, i'm struck by the linguistic explanations that he has of his world and the importance of world building through language. We know that Tolkien is philologist first and foremost and his favorite languages were Welsh and Finnish, inspiration for Quenya and Sindarin.
"In order of time, growth and composition, this stuff began with me--though i do not suppose that that is of languages that is much interest to anyone but myself. I mean, i do not remember a time when I was not building it. Many chilren make up, or begin to make up, imaginary languages. I have been at it since I could write. But I have never stopped, and of course, as a professional philologist (especially interested in linguistic aesthetics), I have changed in taste, improved in theory, and probably in craft. Behind my stories is now a nexus of languages (mostly only structurally sketched). But to those creatures which in English I call misleadingly Elves' are assigned two related languages more nearly completed, whose history is written, and whose forms are deduced scientifically from a common origin. Out of these languages are made nearly all the names that appear in my legends. This gives a certain character (a cohesion, a consistency of linguistic style, and and illusion of historicity) to the nomenclature, or so I believe, that is markedly lacking in other comparable things. Not all will feel this as important as I do, since I am cursed by acute sensibility in such matters."
What a great letter- we will then go into his inspiration for Silmarillion, The Hobbit, LotR. :)