I'm rolling around an idea for something that centers around a clash between old and new, with a social justice theme.  Essentially, the setting is something like you 'standard' Tolkien-esque fantasy setting (elves, dwarves, ect), except that it's in the process of changing to something much different.  The timeline begins a few years after 'the Final Battle' between good and evil, except that what made it 'final' wasn't that it was a victory for one side.  Instead, it was the end of definitive, clear definitions of good and evil.  The 'good' races got so desperate that they committed atrocities, and the 'evil' races demonstrated a great deal of virtue.  The divisions where destroyed cataclysmic, and now the world is picking up the pieces.

As a way to play on this idea of change, the setting is in the process of moving from a traditional fantasy level of medieval tech, into a steam-punk industrialized era.

I see it as a heavily narrative system, most likely with a 'meet-the-challenge-rating' style of resolution mechanic.  Characters would most likely be embroiled in both the action-adventure end of social conflict and politics.  I've got a lot of material written up related to bigotries found in the various cultures and religions (I'm a clerical aspirant in real life, so that part comes easy to me).

One of my concerns (which apparently was one of Tolkien's as well), is that I don't want to have people reading into various groups complete analogs of actual groups in real life.  For instance, I have the Halflings having been the victims of a holocaust and two generations of slavery, and I'm trying hard to make it difficult to see them as either Jews or black people.  One of the things I want feedback on is this aspect.  I know some people will want to say "don't touch that", and, not to be rude, but expect me to ignore that.  The point of addressing a setting like this is to give a setting to explore social issues by metaphor, particularly because they are sticky issues.

I've got a bit of a system for 'motives' where the characters who act on their motivating passions recover 'drive' which can be used to boost rolls.  'Faults' are negative aspects of character which, along with 'goals', when acted upon, gain the character something like experience points.  Those points can be used to buy trait improvements.  I'm hoping to make the goals and the drive parts of the game fairly central, so feed back on those is welcomed as well.

Initial thoughts?

I think this sounds like an excellent setting for the solar system game, which I would recommend you look at, as it includes a:

player triggered xp system based on highlighting certain features of the character,
pools of points that are spent in serious conflicts or to activate special abilities, and recharged by letting the character enjoy themselves, which you could tweak to drives,
"secrets" that allow you to differentiate characters of different races without making their differences automatic,
and the assumption that player characters will go through some distinct change and leave play eventually.

This seems exactly the sort of thing you could use as a basis for your game, sufficiently changed around to suit what you've made, and it's actually freely available to use, even commercially, so long as you give some credit to the two previous designers. You could also look at the original game "the shadow of yesterday" which was also designed for humanised semi-apocalyptic fantasy.

Seen as this looks from the outside like parallel evolution of the same system ideas, it'd be very interesting to see your version of these ideas, how it compares etc. You might find that portraying the steampunk industrialisation puts a very different slant on things, or that you have some deeper goals that do not mesh with that game, or that there is some particular potential in the way you were thinking of doing things that this system doesn’t have. Or it could allow you to get straight into working with your setting. Either way, it seems it could be very informative.

I think it sounds pretty good.

Personally I wouldnt worry about the Hobbits being seen as Jews because they have different cultures - and Tolkien has already defined the hobbits culture for you more or less.  Its not like you are taking Jewish people/culture, renaming them hobbits, if you know what I mean.