In regards to the weaker unit, they will also be cheaper, so you can produce many more and more quickly.
Here the 'warrens' from FfH may serve well which doubles production for the Orcs for certain units.
As far as the Elves cutting the trees, I probably don't remember my LoTR as well as you guys do. I kind of remember the original Eldar being friendly with the Ents, teaching them their langauge and all, so I thought they wouldn't cut trees and anger the Ents.
Anyway, if you use the FfH mechanic of being able to build improvements on forests you wouldn't cut the forest anyway in practical terms regardless of lore!
Best wishes,
Breunor