(Also, of course, Beorn can shapeshift, without even being an elf!)

'Werewolf' is a bit of a misnomer; Tolkien seems to have used it synonymously with 'warg', and with 'wild wolf' and 'great wolf'. Basically, think 'intelligent Dire Wolf' and you won't be far wrong. Sauron aside, there's no evidence they could shapeshift. And what happened to them? Nothing! They're still around in the Third Age, teaming up with the goblins to sing songs about fir trees. ^_^

Vampires... well, it's difficult, since the only two we ever hear about are Sauron (again, shapeshifting) and Thuringwethil - who's already dead by the time her name comes up! It's pretty clear that they're messengers of Morgoth, and that Sauron keeps a few on hand in both Tol-in-Gaurhoth, and when he holed up in the Nightshade.

It's also clearer than I said that they could shapeshift. Sauron turned into the 'giant bat' form, but Morgoth wasn't surprised to see Luthien in a form that could speak, and stand in front of him - not a giant bat, in other words.

So what happened to them? They may have all died in the War of Wrath - they weren't fighters, after all. Or... well, there is an army of giant bats in The Hobbit, and the movies definitely didn't show them as ordinary bats. Given that Tolkien ripped the setting off The Hobbit right out of his Silm manuscripts (check out the dwarf-hating Elvenking in his underground city!), I suspect they're actually bat-form vampires. Perhaps, with Morgoth gone, they can no longer look human - that would make a certain amount of sense.

hS

He can now defy the physics of falling objects by slowing down time! It's too ridiculous now.

Possession shouldn't be confused with plain old OOCness. Possession usually implies a Sue- or slash-wraith, which respectively make the character behave in a Sueish or slashy way. If they're OOC but not particularly Sueish or slashy, or if there's already a Sue in the fic to blame for characterization issues, possession is not likely.

~Neshomeh

In theory, a possessed character is being forced to do things they wouldn't normally do because a wraith is making them, but they're still more or less recognizable as themselves. Sometimes more, sometimes a lot less.

A replacement, on the other hand, is what you get when you surgically remove the defining things that make that character who they are and replace them with BS. I always look for a name-change to seal the deal, too. If they can't even claim to be the same character in name anymore, that's a wrap: they've been replaced. See Archir the Emerald, for example, who was originally supposed to be Harry Potter. Other examples from my missions include Severus "Sithchean Bran" Snape from "Family Ties" and Hermione "Nadia" Lupin-Black (or whatever) from "Harry Potter and the Dragonriders of Pern." I could've gone the same route with Ginny in that mission, but although she was pretty speshul, she wasn't too horribly OOC motive-wise, her name didn't change, and her backstory was still intact, so I just had her be possessed.

Unfortunately, what seems to happen in practice a lot of the time is that a writer just wants to kill or recruit something, so they declare it to be a character replacement. It's annoying. Please strive to avoid doing this.

~Neshomeh