Yes, so I hope it was okay with him when Lloyd Alexander took LOTR, watered it down, combined it with everything he could profitably extract from Mabinogion, and published the end result as the Chronicles of Prydain.

On a more serious note, I would suggest that Tolkien with his unabashed traditionalism was actually a major figure in the 20th c. postmodernist tradition. The "Cauldron of Story" is not very far removed from "Death of the Author" or "Primacy of Language". Tolkien was just peculiar in his choice of source material. He also managed to make his texts not look like romanticised folkloristic pseudomedieval fare of the early fantasy writers by adopting the technique of realist writers of the 19th century.