Gandalf said during the Last Debate that the good guys had always made the fatal mistake of conserving their strength and watching, and had figured out too little too late.
A lot of this was due to Saruman's incredible power to sway people to his point of view. He managed to keep them from going after Sauron far, far longer than they would have otherwise. Apparently Saruman's voice was able to affect even the wise.
A second factor is they simply didn't know it WAS Sauron.
The darkness creeping over Mirkwood was bad, but there's a problem with Mirkwood: its isolationist policy. Thranduil had cut off contact with Lórien, pretty much, partly due to massive losses in the Last Alliance, and partly because his family had rejected Sindarin heritage, deciding after the Kinslayings in the First Age and the Ruling Rings and resultant war in the Second Age, the elves would've been better off if they'd never gotten involved with Valinor or anything to do with it (like Melian). In particular Thranduil's father hand moved north in the Second Age to get away from Galadriel, long before Dol Guldur was a problem.
Their isolationism meant news didn't come out of Mirkwood very often.
Apparently Gandalf was the first to discover Dol Guldur was held by Sauron. Again, it seems Saruman had counselled them against going there. And Elves and Men had plenty on their hands defending their own borders— again, the mistake they always made. Gandalf went into Dol Guldur not long before The Hobbit began, and only then discovered it was Sauron (called the Necromancer) and not a Nazgûl which (probably) Saruman had guessed it to be.
Saruman delayed the Council too long. They drove Sauron out and thought they'd defeated him— I'm not sure why— and Gandalf admits they were tricked: Sauron secretly retreated to Mordor and hid low for a decade or so.
Again, the good guys conserved forces too much. No doubt Saruman was there to declare the threat had been removed along with the Necromancer, and that Dol Guldur would be perfectly fine now. Which it was, for at least ten years.
I don't think they had the power to destroy Dol Guldur except by using the Ruling Rings. Galadriel could have done it then, yes. But if she had, she would have revealed that she had Nenya, and she was taking great pains to conceal that she was a Ringbearer. I'm not sure in the long run whether it was a good thing that the Elves concealed who was holding the Rings for so long.
In LOTR she tells Frodo that Sauron suspects, but doesn't know she has one. It's Lórien's chief protection. It is definitely a double-edged sword.
The Wood-elves did not have the power or will to fight. Thranduil had lost his father, his noble house, and two thirds of his people, the last time they went to war in the Last Alliance. After that he risked few open engagements, much like the Green-elves of the First Age (some of whom had settled in Mirkwood after most of Ossiriand was flooded out). You will notice Thranduil does not help in any way against Dol Guldur: he just moves as far away from it as he can. I suspect thinks that, like Morgoth, the Elves will only waste and diminish their strength by fighting a futile battle. (They couldn't beat Morgoth without the Valar, and in the Third Age they wouldn't have beaten Sauron without at least one Maiar).
So the only army available to help against Dol Guldur was Lórien's. Were they enough? I get the impression the White Council tackled Dol Guldur all by itself, because magic of that sort is out of the ken even of most Elves (especially Silvan elves, who are a simple people— Lórien had some Sindar but a lot of Wood-elves too). Lórien never had the population of Mirkwood: it was very small. In the Last Alliance, King Oropher of Mirkwood had led an army, and was joined by his friend King Amdir of Lórien with a company. This was well after Eregion fell in the middle of the Second Age, and refugees of Eregion were Lórien's last significant influx of population. Since then they'd been going to the Havens, and a great many had died or fled when Amroth was lost and the Balrog was causing problems in T.A. 1981. That was only a thousand years or so before LOTR, so not many children would have been born in the meantime. All of which means that Lórien's fighting strength was small, and could only manage stealth and guerilla tactics (as indeed they use when orcs follow the Fellowship to Lórien's eaves) not head-on assaults.
So, finally, I think they had insufficient forces.
And that was a problem they never solved. In the end, it was one hobbit, and a lot of luck, and a magic ring that conveniently would destroy Sauron and most of his dominion, rather than force of arms that prevailed.
**note: I'm spouting a lot of Mirkwood and Silvan Elf history here. 99% of this is from the Galadriel and Celeborn chapter of Unfinished tales and, in particular, the Appendix on the Sindarin princes of Silvan kingdoms. It's not all officially canon, but there's enough consistency in Tolkien's post-LOTR writings on Mirkwood and Lórien, at least about general things like policy and population levels and their role in the Last Alliance, to assume that those things are sound.
:moderator: I just edited this excellant post to switch off an overlong signature. :moderator: nn[Edited on 20/4/2003 by Valedhelgwath]