This. Bilbo was not really either complimenting nor insulting the hobbits of the Shire; he was messing with their minds, being both mildly complimentary (most of you are worthy) and mildly insulting (but I’m not all that fond of most of you). Entirely in keeping with the gift notes.
Now, Bilbo was the best scholar of any of the hobbits, absolutely agreed. But was he the best hobbit? Who was greater? Bilbo, with his adventures in The Hobbit, his finding of the Ring and more importantly his voluntary surrendering of it, and his many translations and scholarly works? Frodo, who defied the Nazgul at the Ford of the Bruinen, stabbed a cave troll’s foot in Moria, resisted Boromir’s attempt to take the Ring, made the courageous decision to continue alone to Mordor, tamed (at least temporarily) and protected (to the best of his ability) Smeagol, carried on the slog when almost anyone else would have lain down to die, and utimately carried the ring to Oroduin, organized and refined Bilbo’s work and added his own work to it? Sam, who did most of the work and got little of the credit, who battled orcs in Moria, looked into Galadriel’s Mirror and saw what he feared most, yet continued on, who figured out Frodo’s intent at Amon Hen and followed Frodo with pretty much everything they subsequently relied upon for survival, who impressed Faramir, injured and drove off Shelob and took the Ring when necessary, rescued Frodo (and voluntarily returned the Ring to him), and half-dragged/carried Frodo across Mordor (marshalling resources and finding water along the way at great risk) and to the fires of Mount Doom, then got the injured Frodo to the highest point around so that they could be rescued, and put the final touches on Bilbo’s and Frodo’s accounts of the War of the Ring and the Return of the King (while serving seven terms as Mayor of Hobbiton and raising numerous children) before building a ship and sailing from the Grey Havens? Or Merry, who led the hobbits from the Shire, with Pippin roused the Ents, unknit the sinews of the Witch King of Angmar, making it possible for Eowyn to slay him, who led the Scouring of the Shire and became Master of Buckland, and also contributed to Bilbo and Frodo’s historical work?
So which was the greatest hobbit? Bilbo’s acts in The Hobbit are pretty darned impressive, including his rescue of the Dwarves from the Spiders of Mirkwood and the dungeons of the Elf-King, his finding of the door at the Lonely Mountain, and his theft of the Arkenstone to give it to Bard’s people in order to resolve the stand-off at the Lonely Mountain. And his many scholarly works, both translations and original histories and poetry, especially if you include the tales that ultimately became the Silmarrilion, are unparalleled. But he’s not really a major player in the affair of the Ring once he surrenders it to Frodo, although his gifts of the mithril coat and Sting were two of many factors that allowed Frodo to make it to Oroduin.
Frodo is, of course, the primary figure in the destruction of the Ring, despite his succumbing to it at the end. He’s pretty scholarly in his own right, due to Bilbo’s influence. I doubt if alone he could have made it a week after the breaking of the Fellowship; Gollum would have killed him, or he would have become permanently lost in Emyn Muil, or fallen off of a cliff or into a bog. But he kept on going. He had no hopes for himself, no belief in his ultimate success, he was exhausted and in pain, but he kept on going. He played almost no role in the Scouring, other than to keep a lid on the vengeance extracted by the hobbits and showing mercy to Saruman (although these were non-trivial things). Plus, without him, most of Bilbo’s scholarship would have been lost in the mass of papers he had in his room at Rivendell. It was Frodo who went through them, oranized them and added the stuff he knew.
Sam was, first and foremost, a servant. He would never have been given the Ring to carry, had Frodo fallen at Weathertop or Moria, because he was a servant, and in that culture, that meant he was a lesser order of being. It wouldn’t ever have occurred to him or to anyone else to give it to him. Only when he was the only one left with Frodo did it occur to him that he was the one left to carry on if Frodo fell; only then did he become a companion rather than just a servant in his own mind. And even then, he decided he wasn’t capable of doing it without Frodo and turned back to find him and die defending his body rather than carry on to Mount Doom. What would have happened if Frodo had died and Sam had somehow evaded capture in Cirith Ungol is hard to know. He had the resources to make it, but it’s questionable as to whether or not he would have had the resolve. He would have been broken by Frodo’s death; he was broken by Frodo’s apparent death. His ability to refrain from putting the Ring on for the sake of invisibility was limited, even though the Ring couldn’t corrupt him as it would have liked. So it’s questionable as to whether or not Sam could have completed the quest without Frodo. It’s unquestionable that Frodo could not have completed the quest without Sam.
Merry, of course, had little to do with the Ring, but arguably his actions saved Minas Tirith and the lives of many of its citizens. And if Minas Tirith had fallen, Mordor might not have been emptied and Frodo might well have been caught. Merry was also the co-leader of the Scouring of the Shire, and more of a scholar than Sam.
So who was the greatest of the hobbits?