They digitally shrunk them. Those shots don't bother me (referring to Frodo leaping in cart, Merry and Pippen tackling Boromir, etc.). They are better because you can see faces. Yes, they look awkward in terms of scale, but then again, Hobbits are supposed to be awkward in terms of scale when compared to humans, elves, and wizards. Looking at the stand ins that were used in ROTK, they just didn't appear the same. They were stockier than they appeared when they are either by themselves or facing forward in a composite shot. They don't look like who they are supposed to be standing in for. It felt like PJ was copping out at the last second and said, "screw it, skip the effects, let's save money and use a body double." It really irked me.