The bonus level is unlocked after you've completed the whole game. It's located in Rivendell in a secret location which you will be guided to after the credits are through. Follow the path and once you're there, there will be a painting of LEGO studs, stand on the highlighted ground and press B.
Once you get to the bonus level...SMASH STUFF! If you've ever played any LEGO games (and their bonus levels), then you know what to do. Smash just about everything you can find until you reach 1,000,000 studs. This particular bonus level seemed easier than others (like LEGO Batman 1 & 2) since you don't need to change to different characters so much. Just Legolas for the tightrope part.
It took me a while especially since there are no guides (except this one now, I guess). I don't know if they give you more than enough things to reach one million because there are some buldings that wouldn't continue to break.
Sorry, no video. As I said there seems to be no guides what so ever for this game (especially on TA).