Literal interpretations in Tolkien's work

Note: it is likely that what I'm saying here has either been said before, or been refuted by Tolkien scholars. If so, I'd be happy to learn from your comments referencing those works.

It's been over a decade since I took my Old and Middle English literature classes at uni. We dedicated some classes to an in-depth reading of Beowulf. As some of you will know, Tolkien himself spent significant time on it (see his "Monsters and Critics").

Beowulf (the literary work) always attracted me: written around the year 1000, it is an epic legend about a hero in 5th century Scandinavia. "epic" here refers not to how we mostly use the word today (though I'm not sure the cool kids still use it - gods, I'm getting old), but to the literary genre of an epic, where characters that exceed human feats are "going on an adventure" (wink) and where supernatural forces (gods or others) are involved. For reference, the Odyssey is another "epic".

What is especially relevant for the title of this post, is that some of such epic poems (especially such old ones) have a strong oral tradition: poets/orators would tell the story to crowds of people. Entertainment is a crucial aspect of it, like with our current media. Oral tradition, passing the story down from generation to generation, leads to changes to a story until it is formalized into canonical writing. It may be made more fantastical, more hyperbolic, to astound the crowd sitting at the orator's feet. Like how youtubers (tiktokkers?) continuously make more flashy and fast-paced content.

That brings me finally to Tolkien's work. LOTR and the Hobbit are, in essence, based on storytelling: a book that is written by in-universe characters after adventures happened. The content is clearly related to the epic (extraordinary characters going through extraordinary events). And I can't help but feel that the oral tradition can be "read into it" too, for instance Bilbo first talking around a fire to his Hobbit-friends about all the adventures he had before finally writing them down. As such, I've always felt that some people take some phrasing too literal, which should rather be taken as part of the tradition of hyperbole and oral performance: describing a dragon as large as a town is likely an exaggeration and should not be taken literally to calculate the size of the average dragon species in Middle Earth; it's a literary device.

You're left wondering what is intended as real, and what is figurative speech. But perhaps that's what makes these works so wonderful and widely liked: while Tolkien describes the stage and players, your own imagination brings them to life.