Tolkien had a very inconsistent usage, he capitalised various things at different times and seemed to have the consistency one would expect from Old English. This has proved a continuous struggle for Christopher and the publishers to attempt to create some consistency, as noted on in "The Lord of the Rings: A Reader's Companion".
With regards to words beginning Elf-/elf-, Hammond and Scull had the following to say on the matter.
In 1975 Christopher Tolkien advised Allen & Unwin, regarding a list of sug-gested emendations to a reprint of the 1974 Unwin Books edition of The Lord of the Rings, that in words such as dwarf-candles, elf-fountains, and goblin-barkers the first element is used attributively and is properly in lower case. ...
Of this second group, most appear to be specific names or titles, or to refer to specific groups, e.g. Elven-rings denotes the whole body of rings made by the Elves of Eregion, and Elven-smiths refers to those particular Elves; and on this basis we emended one instance of elven-folk in Appendix F ('the Elven-folk of Mirkwood and Lorien') to Elven-folk.
The Lord of the Rings: A Reader's Companion
The first group is lower case (i.e. elf-) and the second upper case. Full list below, 1 This gives us a little insight allowing us to make not that the capital seems to be used for specific names/titles/groups in this case and that the lower case is used when an object belongs to one of the races.
A later analysis by H&S suggests that Tolkien preferred to use the capital for Elf when talking about the race as a whole (although the analysis was specifically for "Elf-friend").
In our analysis of the various editions of The Lord of the Rings the capitalized spelling Elf-friend was found to be Tolkien's clear preference ('friend of the Elves', of the entire race), rather than elf-friend, which had also appeared. Two instances of the latter form were emended to the former in the edition of 2004.
ibid.
It seems evident that Tolkien had preferences for how he liked to use his capitals, but even he was guilty of applying them inconsistently:
in a check copy of the second edition Tolkien wrote: 'Elvish as a separate adjective should always have capital (as English French etc.)'. Thus one finds Elvish character, Elvish knife, Elvish smiths as well as Elvish language, Elvish speech, etc., but elvish minstrels, elvish robes, etc. as well, capitals and lower case about evenly divided in occurrences.
ibid.
Tolkien does come up with a definitive rule on the matter, regardless if he himself applied it consistently. In a correspondence with Allan and Unwin he had the following to say:
The capital should be reserved to cases where Orcs (etc.) are referred to as a race, a kind, or in some generalised sense. There will of course be marginal cases - no doubt also definite inconsistencies within the general scheme. Thus the foreword (written later) should have Orcs . .. and Hobbits.. .. The same applies to Dwarves, Elves, Wizards. But on the whole I would strongly suggest leaving the text as it is in this respect - and certainly if in any doubt.
ibid. citing: Tolkien-George Allen & Unwin archive, Harper Collins
Tolkien, however, had little interest in editing the inconsistencies, and when he did undertake the project he left several gaps or "intentional" misses, as stated my Christopher Tolkien in a private correspondence with H&S and in a letter from Tolkien to Allen & Unwin, written in October 1967:
However much my father desired to achieve consistency at every level of his work, from capital letters to the dates of dynasties, he was bound to fail. He didn't go in for steady, meticulous, plodding reading (re-reading) of his texts; rather, his eye lit upon things that struck him, & he made a hasty note in the margin. His life was a perpetual battle against time (& tiredness), and for a world-class niggler (as he cheerfully recognized himself to be) this was a perpetual frustration. But he 'niggled' on a grand and noble conception, & indeed its coherence in fine detail is a part of its power
ibid. in private correspondence with Christopher Tolkien
Personally I have ceased to bother about these minor 'discrepancies', since if the genealogies and calendars etc. lack verisimilitude it is in their general excessive accuracy: as compared with real annals or genealogies! Anyway the slips were few, have now mostly been removed, and the discovery of what remain seems an amusing pastime! But errors in the text are another matter.
ibid. citing: Tolkien-George Allen & Unwin archive, Harper Collins
Although the above letter states he didn't intend to make changes, he did make a few before release of the second edition.
1
Of similar kind are forms in elven- : elven-blade, elven-blood, elven-boat, elven-bows, elven-brooch, elven-cake, elven-cloak(s), elven-eyes, elven-fair, elven-fingers, elven-flowers, elven-glass, elven-grey, elven-hoods, elven-light, elven-maids (excepting the poetic 'An Elven-maid there was of old', Book II, Chapter 6), elven-mail, elven-princeling, elven-rope, elven-runes, elven-script, elven-sheath, elven-ship(s), elven-skill, elven-song, elven-strands, elven-sword, elven-tongue, elven-tower, elven-voices, elven-white, elven-wise (but compare 'the Elven-wise, lords of the Eldar', Book II, Chapter 1), and elven-work. In Tolkien's usage these are clearly in the majority compared with capitalized Elven-folk, Elven-home (as a place name), Elven-kin, Elven-kind, Elven-king(s), Elven-lady ('the Elven-lady', lady of the Elves, i.e. Galadriel), Elven-latin, Elven-lord(s), Elven-lore, Elven-rings, Elven-river (i.e. the Esgalduin), Elven-smiths, Elven-speech (but compare elven-tongue), Elven-stars (poetically), Elven-tears (poetically), Elven-way ('the Elven-way from Hollin'), and (the) Elven-wise.
