It also appears to be a human name (there’s a legal case of Hobbit v London), but it’s clear enough Denham meant some kind of elf, fairy or some such.
I suppose the main possibilities are
a) that Denham and JRRT each came up with hobbit independently, possibly deriving as a diminutive from Hob = elf
b) that JRRT saw Denham’s list (JRRT claimed to have made up the word but he may have simply misremembered. It would be easy to go through a long list like that and later think of a word and not remember specifically where you’d encountered it.)
or c) JRRT got the word from some source other than Denham.
Thanks for the tip on Google Books: isn’t this a wonderful time to be alive? I looked at literally all the entries. Apart from the units of weight and proper names, there are a number of cases where the GB character recognition has failed (e.g. for bobbit, or for hobby, or Hobbii, which is a Latin adjective meaning pertaining to Hobbes, I suppose). There’s one case where it is used as a pronunciation guide for Hobit in an English-German dictionary (hobit, apparently, means “feuermorsar”, fire mortar.
There is one entry that baffles me.
The Port folio: Volume 6 - Page 157 By Joseph Dennie, John Elihu Hall
she gave us a very hearty welcome, for Blyth was she but an’ ben, and when She came ben she hobbit, and introduced us to Maggy Lauder
Possibly it means “hobbled” but the letters on the page are clear enough as “hobbit”.
Early popular poetry of Scotland and the northern border: Volume 2 David Laing, William Carew Hazlitt has a glossary which includes “Hobbit schone, clouted shoes”. Schone was a common word for shoes in Scotland. Not sure what to make of this use of hobbit but there would be no reason to think it would be connected to the magical world of little people.
Apart from that, bupkis. so Google Books doesn’t contain a reference to hobbit meaning a small mythical humanoid prior to 1900.