Update 2: The Hobbit ban has been lifted. Actors and crew members can now accept work from the film.

Update 1: According to MarketSaw, On Wednesday, October 20th an industry meeting took place in Wellington to discuss production of The Hobbit. It was held at Stone Street Studios, A Stage, Miramar at 5 PM and actors, production, and crew members were urged to attend. Did they reach an agreement? Stay tuned for updates.

Just when you thought The Hobbit was getting its act together something new and crazy happens. Last week, we were elated to find out that MGM finally gave the green light to Peter Jackson’s Lord of the Rings prequel. Unfortunately, the good news stops there and some ugly allegations have reared their heads.

A few weeks ago some rumors popped up regarding Jackson and his pending production of The Hobbit. Several complaints from New Zealand and Australian labor organizations including the Actors’ Equity began questioning the director’s crew practices. This bad press threatened to stall the already delayed film, which Warner Bros and MGM were excited to finally get off the ground.

According to NPR, Jackson’s production company Wingnut Films has been at odds with the unions for weeks now regarding their demands for a revised deal. In a statement from the production company they said, “Next week Warners are coming down to New Zealand to make arrangements to move the production offshore,” Jackson’s production company said. “It appears we cannot make films in our own country even when substantial financing is available.”

The ban placed by the actor’s union in New Zealand was said to be lifted over the weekend but Jackson’s partner Fran Walsh says it’s still active.

“The boycott has not been lifted. If anyone goes to the Screen Actors’ Guild (of America) web site now they will see we are blacklisted,” Walsh told National Radio. Warner Bros. “are saying they need stability and certainty and that’s no longer here … (and) they can protect their investment better elsewhere.”

The Hobbit is scheduled to begin production in February 2011 so they’ve got some time to choose another suitable location.When news first broke of the disagreement, Jackson suggested that he might take the production over to Europe, Eastern Europe to be exact. If things keep going this way, that’s exactly what will happen.

What do you think of the drama surrounding The Hobbit? Do you think the film will get delayed again?