Just hit on this thread yesterday, and like many before me, I didn't get much done at work while going through it. Oh well, now that I'm already in the hole, I'll spend today contributing a few posts.
The lore characters encountered during chicken play have been covered already, but the one that really cracked me up was...
***SPOILER***
The Grey Squirrel on the island island in Nen Harn. When you consult him regarding the wolf problem in the Shire, he maniacally tells you (to paraphrase) that the wolves ain't no thang and that the grey squirrels will crush them (along with the rest of the world) as soon as they've dealt with the pesky red squirrels. I really wish I'd taken a pic of the text, but I was laughing too hard.
The little megalomaniac is referencing, most directly, an issue in early beta where players took exception to the presence of grey squirrels in-game because Tolkien, in fact, detested them and had said so in a letter. I've only been able to find second-hand reference on the web and can't locate original boards (perhaps Berephon can further elucidate); and if such a letter by Tolkien really exists, I've been unable to track it down, either. But...
Grey (I'll continue to defer to the British spelling, for now) squirrels are a species non-indigenous to the British Isles, having only been introduced there (probably from North America) in the late 19th Century. They also don't co-habitate very well with their red cousins, and will generally kill them on sight. The result is that, in the time since their introduction, they've all but decimated the native red-squirrel population in England.
We know of many cases where Tolkien, ever the English nationalist, directly avoided or gave special treatment to specifically non-English elements in his books, especially recent New-World introductions. Reference to "tomatoes" (again, North-American in origin) in The Hobbit was replaced by "pickles" in later editions. "Taters" have been covered frequently in this thread, being an English rustification of the New-World "potato." "Rabbits," which were probably unknown on the islands prior to the early medieval period and for which there is no Old English word are most-often referred to as "coneys." (Indeed, Tolkien went to great pains to dispel the common assumption that the word "Hobbit" was somehow associated with "rabbit," despite having himself several times compared Bilbo to one in the book.) Of course, he went to great lengths to explain the presence of "pipe-weed" (not "tobacco") in Middle-earth.
So, even if there is no letter making his preference explicit, we can assume that Tolkien knew about the great grey squirrel infestation and may have disliked them on principle.
The joke had some special personal associations for me for reason of a bit of family history. My great-grandfather was, for a time, the caretaker of a garden cemetery (now on the National Register of Historic Places) in eastern Pennsylvania. At the time, the cemetery and surrounding city had a healthy red squirrel population. Knowing nothing of their natural enmity and thinking to introduce some variety into the fauna, my great-grandfather arranged to have some gray squirrels from mid-state trapped and released on the cemetery grounds. Suffice it to say that no one in town has seen a red squirrel in quite some time.
Finally, there have been recent reports in Europe and the U.S. of mutant black squirrels, which are apparently quite the uber variety and may even give the grays a run for their money (for a recent story, see Black is the new grey for squirrels).
Hmmm.. Black squirrels. Case of real life imitating Mirkwood?