Well, I think the “answer” to the dwarves lack of facial hair is the same as your insight into why Radagast has a bird’s nest in his hair–to make them stand out as an individual characters. Jackson had 13 characters to create that the audience has to be able to identify as individuals, so how do you do that? By making each one’s look very different from one another. He may have been a bit influenced, perhaps unconsiously, by the difficulty some people had telling Pippin from Merry in LOTR. I knew people who couldn’t tell one from the other. So, having 13 characters, all of the same race/species to portray in film that an audience can identify is quite the challenge. I can sympathize with him.
We have to remember too, that he is creating a story arc between 3 films, and so he wants us to remember each character as they develop in the next 2 films. We need to come to like, if not love, them so when they are put into mortal danger and/or killed we we feel for them, maybe even grieve for their loss. He’s trying to make emotional connections through definite identifications–at least that’s what I think Jackson was thinking. Of course, I could be completely wrong and he just doesn’t “get” Tolkien, but I don’t think that’s completely the case.
Jackson certainly doesn’t grasp the Catholic elements of Tolkien’s writings, but considering the man has no definite faith (that I know of) and we don’t know if he has any form of spirituality, either, that’s hardly surprising–nor do I expect him to see in Tolkien what we Catholics do. However, all in all, I think he has captured some of the spirit of the writings, and I think that’s saying a great deal in our modern times.