Yes the movie is a Trilogy now (They announced it a month or 2 ago) ..
I believe the idea behind it is to make a better link between The Hobbit and LOTR ... They are taking information from different sources (Appendices of Return of the King and any other inbetween information they can get) and are going to "Fill in the Gap".
I was wondering for a little while why on earth they were putting Legolas in 'The Hobbit' movies. Sure he's the Prince of Mirkwood, but he was never actually IN the book, so I'm assuming now that his part will be in the Third movie. Regardless it shall be a 3 parter and I'm EXTREMELY excited to see what they do for the third movie. And thank God for Mists of Pandaria, it will be my distraction until December, the months should go fairly quickly with it to focus on
Wait what? Did you mean to say they ARE NOT CGI? I have full faith in Peter Jackson to make it all work, if you go back and watch some of the Behind the Scenes on FOTR you'll see just the extraordinary amount of work, effort and time that went into ensuring that it always looked like the characters were the right Height.
In one of the Production Vids they show that Beorn's House is built to the scale of a Hobbit, and it's HUGE. Complete with just insanely intricate wood carvings, tables, chairs EVERYTHING. They put so much effort into LOTR and it looks like at least equal if not more effort is being put into these movies.