We know the history of European expansionism and colonialism over the last 500 years.
That doesn't mean ancient Europe was as "diverse" as modern Europe.
To suggest that because of that history of colonization we should pretend ancient Europe was always diverse is ridiculous.
Actually to even be more honest, why would any group that was subject to injustice want to be part of European culture in that case?
Who is making the argument that changing these stories is somehow "repayment" for the wrongs of the past.
Last I checked it was executives at these companies making up these talking points and most of them are white.
Doesn't mean that there cant be diverse stories based in a European setting as fiction.
But to argue that all fiction based on European history and mythology MUST include diversity is a problem.
It takes talent and creativity to define a world and all the different cultures, conflicts and controversies.
That includes defining the different customs, mannerisms, languages, traditions, styles of fighting, costume and so forth.
Tolkien did that and is admired for that which is how you now have D&D based games like WOW which are all directly influenced by Tolkien.
All of these games have diversity baked in, but that includes a lot of world building in defining all these "races" their customs and traditions.
So it is not like there isn't plenty of diversity in high fantasy already. It is just that Tolkien himself wrote a very specific story.
And that story had specific characters, cultures and customs. There were no night elves, void elves, night borne and so forth.
All of that kind of diversity came later, but exists in the greater genre of high fantasy.
This obsession with Tolkien is basically more or less trying to attach his prestige to a set of diversity mandates from studios.
Otherwise they would just make a new high fantasy story and do whatever they want with it.
In European mythology elves were often depicted as pale, angelic like ethereal beings or sometimes like fairies and gnomes.
And outside of high fantasy, they are most often seen associated with Christmas and Santa Claus.