I suspect what Tolkien disliked was the trend towards moral relativism (see Aragorn's words to Eomer) & the taste for irony he found in modern literature ( not much irony in LotR - though as Brian rosebury points out Saruman attempts it in his confrontation with Frodo).
Tolkien obviously felt he had something to offer modern readers which was lacking in the literature of the time. I think he was simply taking a stance, & felt that stance would be acceptable - which he probably didn't at the time of the first forword, where he seems almost apologetic about 'inflicting' this 'old fashioned', 'reactionary' work on the world. His first forword seems almost submissive, in his second he seems to have realised that he's not a voice crying in the wilderness. He cleary believed that literature could have some effect on society, & wanted to make his own position clear.
As to the 'applicability' thing, Rosebury (Tolkien: a Cultural Phenomenon) makes an interesting comparison - that Tolkien is doing, in a sense, what Illuvatar does with the Ainur - giving them the theme to sing, but they apply it in the way they wish - some positively, some negatively, but they are free to apply their creativity to making the world reflect the ideal - Eru's or their own. In that sense Tolkien gives the reader LotR, & we apply it to our lives & our thinking, but just as Eru, having given the gift of creativity & the freedom to apply it to the Ainur & the Children, so Tolkien does with his 'Theme'. Eru is not a dictator, but a creator, whose greatest gift to his children is the ability to 'apply', & the freedom to bring forth, what they have been given; to create themselves in His image. As he puts it:
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If I am right, his rejection of the author's 'purposed domination' over the responses of the reader is much more than an acceptance of the modern truism that a literary text, once published, becomes an item of 'public property' which anyone can interpret or misinterpret; rather, it is an intentional adoption of the creative ethic of Illuvatar Himself, & is in absolute harmony with the moral & political values which pervade Tolkien's work
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