You think Sauron was a bad guy?
Wait till you meet Melkor (or Morgoth, depending on which language).
Silmarillion rocks. I dont know that I liked it better than LOTR but it is really close.
It covers the First Age and part of the Second Age if I remember correctly. I also think it covers the first war with Sauron. There is a TON of information from the beginning of Middle Earth to the third age.
You will come to understand a lot more about LOTR after you read the Silmarillion. Its more about Elves and the Numenoreans. High Elves. Good thing is there are still a few familiar names like Elrond and Galadriel and Cirdan but this is before the coming of the Istari (Wizards). Balrogs and the Great Spiders and Great Eagles are also more abundant.
Let us know what ya think after ya read it Taco.