Evidence and arguments in favor of pointed elven ears;
"I am afraid, if you will need drawings of hobbits in various attitudes, I must leave it in the hands of someone who can draw. ... I picture a fairly human figure ... fattish in the stomach, shortish in the leg. A round, jovial face; ears only slightly pointed and 'elvish'; hair short and curling (brown)."
JRRT - Letters #27, writing to Houghton Mifflin circa March-April 1938
At the simplest level this is taken to mean that 'elvish' ears were pointed in Tolkien's stories. However, it is generally pointed out that the Elves Tolkien was referring to might be those of folklore rather than his own creations. Even this is taken as indirect support on the grounds that if JRRT was here relying on popular understanding of elven ears to clarify his use of 'pointed' (at the top like fairy tale elves rather than diamond shaped or 'pointed' in some other fashion) then the illustrators would be likely to assume that this popular understanding also applied to Tolkien's Elves and draw them accordingly. The fact that 'elvish' is given in single quote marks might be taken to indicate that Tolkien felt the term was somehow inappropriate, though whether that was because HIS elves did not have pointed ears or Bilbo's ears were not of 'elvish' origin or for some other reason would still be unclear. A third possible reading of the letter exists in which it is assumed that there is no intended connection between 'pointed' and 'elvish' - they are two SEPARATE aspects of hobbit ears. However, there do not seem to be any other commonly held perceptions of elven ears, beyond pointedness, for JRRT to have been referring to here.
"LAS(1) - *lasse leaf: Q lasse, N lhass; Q lasselanta leaf-fall, autumn, N lhasbelin (*lasskwelene), cf. Q Narqelion [kwel].Lhasgalen Greenleaf, Gnome name of Laurelin. (Some think this is related to the next and *lasse 'ear'. The Quendian ears were more pointed and leaf-shaped than [?human].)
LAS(2) - listen. N lhaw ears (of one person), old dual *lasu - whence singular lhewig. Q. lar, lasta- listen; lasta listening, hearing - Lastalaika 'sharp-ears', a name, cf. N Lhathleg. N lhathron hearer, listener, eavesdropper (< *la(n)sro-ndo); lhathro or lhathrado listen in, eavesdrop."
The Lost Road and Other Writings, Etymologies
CT 1987 working from JRRT manuscripts written circa 1936-1940
The first root is found in 'Legolas - Greenleaf' while the second appears in 'Amon Lhaw - hill of hearing'. As such the dual meaning of 'las' as both 'ear' and 'leaf' apparently due to the similar shapes of the two things is carried over into The Lord of the Rings.
Working from the same materials Douglas Anderson wrote;
"In his notes on the stem LAS from *lasse = 'leaf' and LAS 'listen' (*lasse = 'ear'), Tolkien noted the possible relationship between the two in that Elven "ears were more pointed and leaf-shaped" than human ones."
The Annotated Hobbit, Flies and Spiders (note 6) 1988
Finally, other readers have rendered the original manuscript text as;
"Some think this is rel. to next and lasse = ear ? The Quendian ears were more pointed and leaf-shaped than Hu??n."
Note that the '??' between 'Hu' and 'n' is indistinct and that the sentence in question is written in a different style than the definitions for LAS above and below, implying that it was a later addition. CT concluded that these alterations went on for two or three years during the writing of LotR.
It seems clear that the final word of the relevant sentence is
ambiguous despite Anderson's unequivocal use of 'human'. CT wrote
that his '[?human]' "indicates doubt as to the correctness of my
reading" but is "better than a guess". Even leaving out this
uncertain term the passage states that Quendian, and thus specifically
Tolkien's, elves had ears which were "more pointed and leaf-shaped"
than something. It has been argued that we do not know the kind of
point or type of leaf intended, and thus that the points might have
been downward or the ears maple leaf shaped (round leaves being left
out as contradicting the 'pointed'). Further, human ears might also
be described as 'leaf-shaped'. The point protagonists respond that it
seems likely that JRRT was referring to the very common sort of leaf
which is rounded at the bottom and tapers to a point at the top - in
exactly the same fashion as the ears of other elves of legend.
Further, the 'downward pointed' or 'maple-leaf shaped' ears would
still be "pointed" and rather notably non-human. Further, if the ears
WERE shaped like those of humans then there would be no conceivable
reason for JRRT to have written the sentence at all.
Finally, illustrators, including Pauline Baynes whose work Tolkien praised, have consistently portrayed Tolkien's Elves with pointed ears without any known objections from JRRT or his family. There is only one known illustration by Tolkien himself of an Elf in which we can even make a guess at facial features. That painting is 'Beleg Finds Flinding in Taur-na-Fuin' from 1928. It shows Beleg in the lower left corner with what might be taken for either a pointed ear or a triangular part in the black hair on the side of his head. The painting is not detailed enough to be certain of Tolkien's intent.
Evidence and arguments against pointed elven ears;
"Elves and Men are evidently in biological terms one race, or they could not breed and produce fertile offspring..."
JRRT - Letters #153, September 1954
"The existence of Elves: that is of a race of beings closely akin to Men, so closely indeed that they must be regarded as physically (or biologically) simply branches of the same race."
JRRT - Morgoth's Ring, Athrabeth Finrod ah Andreth Commentary circa 1959
There are many other quotations in this same vein; demonstrating that Elves and Humans were physically the same race and could be mistaken for each other. As such it is argued that elves and humans being the same physical race must have ears of the same shape and that if they did not they could not be mistaken for each other. This argument is countered by pointing out the myriad physical differences amongst humans of our own world and even moreso in Middle Earth. Hobbits, as the best example, are described as a branch of the human race, but according to the letter quoted above DO have pointed ears. Yet they are mistaken for or compared to normal human children (due to their height) several times in the stories. Given the many variations in physical appearance amongst humans in Middle Earth it is argued that there could be humans who also had pointed ears; indeed some people in our own world have ears which can be described as 'pointed' at the top. Even if this were not the case humans and elves could still have different shaped ears and be mistaken for each other if the individual had long hair, were wearing a hood or were only seen from a distance. Still, Tolkien does list elven characteristics on a few occasions without mentioning pointed ears;
"'Elves' is a translation, not perhaps now very suitable, but originally good enough, of Quendi. They are represented as a race similar in appearance (and more so the further back) to Men, and in former days of the same stature. I will not here go into their differences from Men! [if only he had] But I suppose that the Quendi are in fact in these histories very little akin to the Elves and Fairies of Europe;..."
JRRT - Letters #144, April 1954
"Also I now deeply regret having used Elves, though this is a word in ancestry and original meaning suitable enough. But the disastrous debasement of this word, in which Shakespeare played an unforgivable part, has really overloaded it with regrettable tones, which are too much to overcome."
JRRT - Letters #151, September 1954
"Elves has been used to translate both Quendi 'the speakers', the High-elven name of all their kind, and Eldar, the name of the Three Kindreds that sought for the Undying Realm... This old word was indeed the only one available, and was once fitted to apply to such memories of this people as Men preserved... But it has been diminished, and to many it may now suggest fancies either pretty or silly, as unlike to the Quendi of old as are butterflies to the swift falcon..."
RotK, Appendix F II - On Translation circa 1955
These quotations are used to indicate that the Quendi should not be equated with Elves of other legends despite the use of that term as a 'translation'. At root these quotations are used to counterbalance the common perception that Elves of legend had pointed ears; this being irrelevant if JRRT did not mean for his Elves to be equated with those others. It can be seen from the quotations that JRRT indicated that the older conception of Elves, some of which were not stated to have pointed ears, was quite similar to the Quendi, only the later 'frivolous' elves being inappropriate to his vision.
Finally, the possibility must be considered that even if Tolkien DID with the references quoted earlier mean to say that his Elves had pointed ears that view might have been subsequently rejected or held only for a brief time. The quotations both occur during the period JRRT was trying to reconcile the Elves of The Hobbit with those of LotR and the older mythology. Thus, in the older stories (where in fact they were called 'Gnomes' rather than Elves) they might never have been conceived of as having pointed ears - this only being imposed by the more 'fairy tale' based Elves of The Hobbit.
In the final analysis there is no definitive evidence either way on this issue. A strong case can be made for either viewpoint by leaving out the opposing arguments, but when viewed as a whole the matter is ambiguous. The lack of any reference to elven ears in 'canonical' writings ultimately makes a decisive answer impossible.