UPDATE: Things must be getting close on The Hobbit, because casting buzz is getting strong in Hollywood. Word is Martin Freeman will soon be set to play Bilbo Baggins, that Jimmy Nesbitt has been offered a role and that Michael Fassbender is being pursued for another as is David Tennant. Ian McKellan and Andy Serkis are expected to reprise Gandalf and Gollum.

EARLIER: While it looks like production on The Hobbit is set to start in February on the pair of films directed by Peter Jackson, there are still a few giant issues standing in the way. The films had to go in early 2011 to make the holiday release date. But even though the production schedule looks locked, there’s still the issue of the loud labor fight happening between Jackson and the unions, which have told performers outright not to work on the film because it’s a non-union production. By agreeing to a detente, the films would indeed get underway in New Zealand in early 2011. The delay has also been caused by all the ongoing problems at MGM, and just this week Lionsgate put forth a merger recommendation which Carl Icahn backs. That would obviously affect the pending Spyglass deal  — and add more drama to any major production going forward. (Meanwhile, while MGM goes through all of its tumult, Mary Parent is expectedly in the process of leaving the studio, which she has run for almost three years.) And the financial questions surrounding The Hobbit still remain: How much of the $500 million bill is Warner Bros footing? And who will eventually pony up for MGM’s part. MGM owns international distribution rights. Another delay in all of this has been the negotiation with Jackson. He co-wrote the script and was always a producer, but he only came on board recently to replace Guillermo del Toro as director. December 2012 is the release date for the first first film and the second comes one year later. Both are in 3D.

Peter Jackson Directing ‘The Hobbit?’ TOLDJA!