Let's keep this in mind as we continue. :)
Here's the Halfling entry from B/X D&D:
Halflings are small, good-natured demi-humans averaging only 3 feet in height and weighing about 60 pounds. They are outgoing but not unusually brave, seeking treasure as a way of gaining the comforts of home which they so dearly love.
Definitely sounds right. Anyone with kids also has an idea of just how short and small 3 feet and 60 pounds is as well. But next we get to this:
The prime requisites for a halfling are Strength and Dexterity. A halfling who's Strength or Dexterity score is 13 or greater will receive 5% bonus to earned experience. Halflings who's Strength and Dexterity scores are 13 or greater will receive a bonus of 10% to earned experience.
Whoa. Hold up there a minute. 13 Strength means stronger than average for a fully grown man. Just think about how big someone twice your size and three times your weight (or more) would be. If you were just as strong as them you would be incredibly strong. Go take a look at our Hobbit bad asses again and consider whether they look incredibly strong.
If Dexterity is a measure of "speed and agility" they don't seem on the same level as a fast and agile adult human either. They don't seem particularly smart, wise, hearty, and you wouldn't imagine them leading armies of men into battle.
Basically they're not exceptional in any of the D&D attributes. With that in mind here's my take on a revised class...
Restrictions: Hobbits may not have higher than 12 in any attribute. They use a six-sided dice (d6) to determine their hit points and may advance to 4th level.They may use the following weapons: Dagger (1H), Short Sword (2H), Short bow (2H), Club (2H), Short Spear (d4), Handaxe (2H), Lt Crossbow (2H). Hobbits may wear leather armour or chain mail as well as carry a shield if it has been specifically created for Hobbit sized characters, but since it is unusual to find an adventuring Hobbit they may not begin the game with this armour.Special Abilities: _Hobbits have better saving throws than most classes._ Due to their small size, Hobbits gain +2 AC when being attacked by man-sized or larger creatures. A Hobbit is difficult to spot if they find some cover (even shadows) and remain still, evading detection on a 3+ on a d6.
The new B/X Hobbits have extreme ability score and level caps, limited choice for weapons and armour, and only some minor special abilities. They're in no way balanced to the other character classes. You'd have to be willing to take on things when the odds are stacked against you. You'd need to want to make the game even more challenging for yourself to think about playing one of these guys.
When these Hobbits come swaggering out of the Shire you know they are some bad ass dudes.