The word halfling is  an old Scots English word for "one not fully grown; a stripling"  according to the OED.  Tolkien eventually picked it up as the Common  Speech word for a hobbit on this basis: to indicate one who is roughly  half the size of adult humans.    But the word has other uses in Terry  Brooks' Sword of Shannara and Jack Vance's Lyonesse novels  (and perhaps other fantasy literature as well), and could name  creatures who were half one thing and half something else just as well  as it does creatures who are are half-sized.  Today's Mythopoeic  Rambling will be dedicated to exploring alternative ideas for developing  a halfling race.
Beyond Classical Halflings
Let me start by saying I love Tolkien's hobbits.  While I don't encourage their derivative use  in  fiction unless it is fan-fiction, I definitely understand the  desire to play one of them in a fantasy game with a Tolkienesque setting  -- in which case they shouldn't be, say, the strike force of the  Thieves' Guild, wielding repeating crossbows whose bolts are coated with  deadly poison  (I wish I was making this up just as a random example). To put the same point differently, Tolkien's hobbits don't work in every setting, so I have been  thinking about ways to keep the halfling game race across settings.  I  have two ideas.  The first continues to center on the idea of size  (pygmies) and the second picks up the idea that they are the bearers of a  dual heritage (human descendants of fae).
Pygmies
Real world pygmies  are indigenous peoples in  various areas of the world -- most famously  Central Africa* but also in other regions of Oceania, Southeast Asia,  and South America.   Both the real world tribes themselves and the  ways they entered into  the folklore of other peoples are rich sources of inspiration for a  developing a distinctive halfling race that will fit fantasy worlds that  are different from Middle Earth.  For myself, I will undertake a  reading of anthropological literatureand supplement it with material  from Greco-Roman mythology and African folklore to produce a race that  is proudly African and heroic in flavor.  For example, the war with the  cranes (or better, one of D&D's crane-like monsters) could be  central to pygmy culture and history.  This is the direction I was  planning initially for the halflings in the World of Ygg setting.  Now  to turn away from size and toward the biracial.
Fey Halflings
Fairy  tales and folklore are full of dalliances between humans and the  denizens of faerie.  Classic forms of D&D have a number of fey  creatures in addition to elves as a PC race.  And if you are playing a  game with only the four classic races (and not the races added by  Advanced D&D and its descendants), halflings provide a slot that  will take the place of races added later and have flavor that works  well for half-humans with fey blood.  Halflings' ability to disappear in  wooded areas reflect well the flavor of a fey heritage, and  the diminutive size of many of these creatures in their natural state  would explain halfling size.  
While I imagine the appearance of  this fey-blooded race to vary greatly, they may vary in size, too -- I  suggest two physical types for halflings, to represent the variety of  potential fey parentage: small halflings for those in whom the heritage  of small and beautiful faeries predominate and medium (up to larger than  the average man) for those who derive the majority of their heritage  from big or ugly faeries. In essence, this would allow halflings to take  the place of the roles of half-elves and half-orcs, that proved so  popular in later editions of D&D.   In mechanical terms,  what would decide whether one had generated  a large or a small halfling  would be, above all, strength size (the  idea of a standard halfling  getting a strength bonus has always  stretched believability for me,  certainly any modifier over +1).  Higher  strength scores would indicate  a larger halfling, descended from the  more brutish creatures of  faerie.  The  idea behind this is that the interaction of fey blood with  human in the case of the beautiful races has the quirk of producing  smaller  half-humans, while the larger or uglier fey blood produces a  hybrid vigor that  gives a game equivalent to half-orcs.  All this while  sticking with the core four racial choices.
Elves, Pixies, Sprites, Nixies, Dryads (Gnomes possibly)
Halflings  as they are already represented in the standard versions of the rules  fit well the flavor of humanoids with fey blood: small, hard-to-catch  humanoids who "are difficult to spot, having the ability to seemingly  vanish into woods or underbrush" and are also good as hiding in  subterranean surroundings (B10).  In games that follow the structure of  four PC races, this would
Goblinoids, Trolls (Hags, if they have them in your game)
This  is where I begin to question keeping the mechanics of the halfling for  larger creatures.  The GM may want to come up with flavorful  replacements for the dodging, hiding, and missile accuracy mechanics for  the larger halflings, although, with a little thought, there could be  reasons why they get the same bonuses other than size (they exude a  slippery skin oil, have some subtle, protean ability that doesn't  utterly change their appearance but distorts their physical form enough  to allow escape, their skin color lends them natural camouflage in  certain environments, etc.)  This version of the race could be used to  satisfy the desires of players who like the appearance options that  half-orcs or even tieflings offer in the  the Advanced form of the game  (and its descendant) and.  One thing I can tell right away: using my  idea of a racial primary attribute (and accompanying bonus) that I  briefly introduced in my card generation method, I would switch the  primary attribute for this line of fey halfling from Dexterity to  Strength.
Reproduction 
The  simple solution is to have halflings breed true: they seek out others  of mixed heritage, perhaps as a result of feeling rejection or  difference from the community of their mother, and settle with like  outside of a human or fey community.  Over time, the commerce between  humanity and faerie would result in a significant enough population that  they would come to be, in practical terms, a virtual race.  Location  vis-à-vis populations of different kinds of fey creatures would  determine whether a halfling community was predominantly small  halflings, larger halflings, or composed of both sizes.
Happy world-building until the next Mythopoeic Monday!
*For one way to help the plight of one pygmy people, the Batwa of Uganda, I recommend the Kellermann Foundation. 


