Just in case you're wondering where I am in the plot of Lord of the Rings Online, here's Kharrn having a quick chat with Gandalf the White before Gandalf rides off on an errand known only to himself. That's Théoden King's hall in the background at Edoras. The town is currently emptying as the women and children of the Rohirrim head for the ancient fortress of Helm's Deep.
So in terms of the books, this puts us near the end of The Two Towers. I will say that this expansion has been much more Tolkein centered than the last several. Big parts of the plot the player actually takes part in are from the books. I've recently met Aragorn, Gimli, and Legolas again, and witnessed Théoden escaping the grip of Saruman. Currently helping the people of Rohan prepare for invasion.
Soon Kharrn the Barbarian will take part in the battle of Helms Deep where shields will be splintered,spears will be shaken, and Orc heads will roll.