Thanks Grondy, I really gotta buy a copy of Letters.
Ok so from what Tolkien says, the Valar are not gods...if
one was to define a "god" as "Creator, Prime Mover, omnipotent, omniscient, etc", because that role is clearly Eru Il’vatar.
Buuuuuuut, he acknowledges that the Valar obviously do FUNCTION
as gods, "they are the nearest equivalent" -- which was LOA's point: if it looks like a god, talks like a god, quacks like a god...then you're not really "wrong" to call it a god. (See dude, you swayed me!
So I guess it really just boils down to whose perspective you choose. From Tolkien's (and the reader's) perspective, the world is clearly monotheistic (which was E’dollon's original question/statement) -- there is ONE Creator/Prime Mover, he created the universe, and then created the Ainur to help him. And we know this simply because Tolkien says it is so.
But from the perspective of the inhabitants of Middle-Earth, the Valar would absolutely be gods (or at the very least, god-like). Okay the Elves don't CALL them gods...maybe the Valar taught them not to. Or maybe it's because the Elves are immortal, hence a little closer to the nature of the Valar. Or because they actually saw/spoke to/lived with the Valar, thereby making the Valar "knowable". It's probably a combination between all of that. But then you have Men -- with very few exceptions, they never saw or knew the Valar, so to them the Valar are merely a rumor, just as distant as Eru himself. Men would have to accept the Valar AND Eru both on "faith" alone, whereas the Elves needed "faith" to believe in Eru but not in the Valar.
Basically Tolkien was able to give us the best of both worlds... he was able to have the monotheistic "God" he wanted, and still give us the flavor of the "Classical Myths" by having a pantheon of super-powerful beings, "gods" (with small 'g').
How's that, LOA? We BOTH get to be right!