The Arwen character is being expanded to fill a perceived "void" in the story:  the absence of any woman in the first two books/movies, other than cameos by Arwen, Galadriel, Eowyn and assorted hobbits at the birthday party.

The only major role for a woman in the books/movies is Eowyn.  It's a great part, but it doesn't really show up until the third book/movie.

Just try marketing not one but two movies with no major female characters.

Want an example?  The Thirteenth Warrior starring Antonio Banderas and a bunch of virile, attractive guys was a great movie which bombed at the box office.

So presumably, the nervous producers decided to put a major role for a woman in the first two movies.  Just one, mind you.  (Count your blessings: Pippin and Merry could have been transformed into girls.)

Arwen is the best candidate since she can be written into the movies without doing too much damage to the story.  In the first movie, she could replace Glorfindel, and find the guys as they approach Rivendell.  She could be introduced in a surprise, romantic scene, in which Strider is recounting the story of how Beren met Luthien when Arwen unexpectedly walks into camp and takes Strider's hand, drawing the connection between her story and Luthien's.

In the second movie, Arwen could ride to Rohan with the Dunedain, carrying the banner she made for Strider.  She could be at Helm's Deep, Isengard, and ride to Edoras, even meeting Eowyn (dashing Eowyn's hopes to snare Strider).

As long as Jackson doesn't expand her role too far (i.e., no scenes of Arwen fighting or wearing leather outfits like Xena), it should be acceptable.

Frankly, the major problem may be with the casting of Arwen.  The more I think about Liv Tyler, the less I think she is suited to the role.  She just isn't pretty enough. (Sorry, Liv.)