It's pretty believable that both hobbits and giants were common on Earth at some point.
Hell, I imagine most of human history has been a lot like an MMO. From the time humans could form civilization (let's say 50,000 years ago) up until the dawn of the modern age (let's say 10,000 years ago). At first I imagine life consisted of clearing out dungeons (caves), defeating their inhabitants, making a home for yourself, and going out to hunt more mobs. Then as civilization took root, there were cities with walls that were safe, and outside those cities in the wild-lands you were right back to having to go out and slay mobs in order to acquire more space/resources/living spaces. Thus for most of human history, it was an MMO out there. Go out, hunt, raid, etc, go back to the safety of the city, repeat. Wouldn't shock me to find out dragons also existed at some point (the fire breath was probably an embellishment though). Who knows. We've excavated so little of the actual archaeology on this planet and we have entire continents un-excavated (Antarctica, plus the entire Sahara region).
I think in modern post-flood history, humans have mostly been pitted against humans as the survivors fought over resources and that just became the way of things. No real sabertooth tiger competition anymore either, all the large fearsome beasts had been long-since hunted to extinction. However it wouldn't shock me to find out the antediluvian period was a 40,000 year long MMO.