Recently a commenter name tAmMo started playing around with how encryption and decryption of the packets might work. He made several comments about his progress and just yesterday he posted something unexpected: Source code related to client packet decryption.
So what does this mean? Not much for the "end user", but a great deal for researchers. Also tAmMo did not release the complete code, especially the part of encrypting packets to be sent to the server. This could be used for hacks or to create a private server which is not the intention of this attempt.
The code is hosted at https://gitorious.org/lotro/lotro-tools for now. Take a look at it, play with it, and keep us updated using comments!