Most of the magic in LOTR seems to be alchemical/herbal in nature. There were also
various warding and other enhancement effects. Magic would thus be limited to
healing/protective/enhancement type spells.
You could have spells of destruction, and make them unpredictable with a high
probability of unwanted side effects. Possibly a fun thing to do would be to have
negative reaction modifiers from NPCs, so anyone who uses this type of magic would
be forced to use it sparingly and keep it hidden as well as possible. Unless you're
playing a bad guy, of course. :)
Microprose's Darklands implements this really well, the only types of magic were
alchemy and saints, where almost all the effects were enhancement or healing, in
contrast to the AD&D games, which got boring once you got the fireball spell...
Zangband has a nice system, the more chaos magic your character uses, the more
likely mutation effects will occur (most of which are negative).
Eileen