Yesterday it was reported that Elijah Wood was in talks to reprise his role as Frodo in Peter Jackson's upcoming Hobbit films. This news has been confirmed by TheOneRing.net, and they also offer up details on how big of a part Frodo will play in The Hobbit, and how they worked the character into the script.
He will not have a big role, the plan is to feature Frodo in the opening and ending sequences of the films. Here is an explanation from the source, TORn:
As readers of “The Hobbit” know, the tale of “The Downfall of The Lord of the Rings” and “The Hobbit or There and Back Again,” are contained in the fictional “Red Book of Westmarch.” In Peter Jackson’s LOTR films, the books are shown on screen and written in by Bilbo and Frodo and handed off to Sam Gamgee. (Not explained on film are Sam’s progeny later having the book and being Wardens of the Westmarch — hence the book’s title.) The fictional book, and either the telling from it or the reading of it, will establish Frodo in the films experiencing Bilbo’s story. Viewers to learn the tale of ‘The Hobbit’ with a familiar Frodo getting the tale as well.
So there it is, that is what we will see if the script doesn't change between now and when the film starts shooting next month.
As for other actors who will make a return to middle earth the source says, "Cate Blanchett is confirmed as Galadriel while Hugo Weaving’s Elrond is a prominently featured character in the source material but not confirmed. Liv Tyler’s Arwen could logically be present as could other ancient Elves like Marton Csokas’ Celeborn... Frodo’s return makes it possible that Sean Astin could appear as Sam and other Hobbits such as Merry or Pippin can not be ruled out... Two very obvious absences from any press releases so far are signings of Ian McKellan as Gandalf and Andy Serkis as Gollum. Both actors are believed to be in negotiations and the studio and actors have elected not to conduct talks through the press."
We'll find out soon enough who's in and who's out.