The original hobbit race in OD&D (if limited to the rules from the 3 LBBs) is objectively less powerful and has less potential (in terms of game mechanics) than other races. Hobbits can only be fighting-men and are limited to fourth level. Their only benefits were: “magic-resistance equal to dwarves (add four levels for saving throws), and they will have deadly accuracy with missiles as detailed in CHAINMAIL” (Men & Magic page 8).
What I have gathered from reading various bits online is that Gary likely added hobbits for players who wished to emulate Tolkien (though please take this as hearsay). Having hobbits be weaker actually fit the source material (hobbits as humble if diligent creatures), and there was no particular desire to balance classes back then (especially since parties would often be of mixed level anyways). Thus, one can think of playing a hobbit as “hard mode” D&D.
Bilbo was described as a burglar, but he was nothing like the inspirations for the original thief class (the Gray Mouser or Cugel). Frodo even less so. Despite that, in Supplement I: Greyhawk, Hobbits were allowed unlimited progression in the thief class. From there, the thief evolved into the ninja-like rogue class and the halfling race (due to several mechanical benefits) was often considered the best choice for a rogue. The PC in my current 4E hack game that consistently does the most damage is a halfling rogue.
Now, I love ninjas as much as the next guy, but that archetype is not generally what I associate with halflings. For another take, Final Fantasy did the “cute little guy” in a way would also work pretty well as a tabletop RPG character: the black mage. I know halflings are described as not making very good wizards in most settings, but maybe this would be an interesting fact to change (or allow PCs to play against type). It does seem like magic might be a natural fit for an ambitious halfling that wanted to make it in a world full of tall people.
Veigar: “I am evil, stop laughing!”
|Final Fantasy Black Mage|
|Orco from He-Man|
|Vivi from Final Fantasy 9|
|Veigar from League of Legends|