I was born and brought up in Harold Road, just down from both Perrott's Folly and the Waterworks. I also went to King Edward's which was Tolkien's old school (although by the time I went there in 1968 it had long since moved from New Street to Bristol Road). The received wisdom at KE was that the Two Towers were indeed the Folly and the Waterworks. It's also worth noting that one of the hobbits, Sam Gamgee, was named after a doctor who lived across the road from the young Tolkien in Stirling Road.