Interesting discussion.
This is a very good article on the subject:
http://www.glyphweb.com/arda/faq/sauronshape.htmlAll in all, I would have to agree with this article: it seems that Sauron was indeed able to take a physical form.
However, what this article does not touch upon is the two worlds that all things in Arda live in: the Seen and the Unseen (also given other names). We are familiar with the Seen. I assume this is what everyone means with a 'physical form'. His spirit would refer to Sauron in the Unseen.
The Seen is where Frodo looks like a Hobbit, Gandalf like an old man and a Nazgul like a black-cloaked rider, where his head is invisible. The Unseen is where that same Nazgul looks pale-grey, ghastly. If we consider what the Nazgul looked like, I think we can gather a great deal of information about how the Seen and Unseen interacted (and thus how Sauron -being a Maiar- could be 'seen' at all). Here's what we know of the Witch-King:
The Return of the King, LoTR Book 5, Ch 6, The Battle of the Pelennor Fields
Quote:
"...black mantled, huge and threatening. A crown of steel he bore, but between rim and robe naught was there to see, save only a deadly gleam of eyes: the Lord of the Nazgûl."
The Fellowship of the Ring, LoTR Book 1, Ch 11, A Knife in the Dark
Quote:
"There were five tall figures: two standing on the lip of the dell, three advancing. In their white faces burned keen and merciless eyes; under their mantles were long grey robes; upon their grey hairs were helms of silver; in their haggard hands were swords of steel. Their eyes fell on him and pierced him, as they rushed towards him. Desperate, he drew his own sword, and it seemed to him that it flickered red, as if it was a firebrand. Two of the figures halted. The third was taller than the others: his hair was long and gleaming and on his helm was a crown. In one hand he held a long sword, and in the other a knife; both the knife and the hand that held it glowed with a pale light."
The second quote comes from when Frodo wears the Ring, and thus seeing the Nazgul in the Unseen.
These two quotes has always struck me to be particularly interesting. There is an interaction between the Seen and the Unseen. The Nazgul, being Men ensnared by the power of their Rings and controlled by Sauron, have long yet passed away (their Human form that is). Their souls remain, bound to their Rings. In the Unseen they still presummably
look like their former human form, however when looking in the Seen, they cannot be seen
at all. It seems thus that the Nazgul solely live in the Unseen.
There is, however, also an interaction possible. They could be robed, could wield a sword, wear a crown and even ride a horse! In a way, this seems pretty physical to me.
Now, there are more creators that live in both worlds at the same time. The Maiar, Valar and Elves most notably. The Elves that have been to Valinor are especially bright in the Unseen (and this is why Glorfindel could ride against the Nazgul). The Maiar were spirits living in the Unseen, but they could generally decide to take form that could be seen in the Seen. It seems to me that the Valar had more freedom of the form that they could take. From the article I've linked above, it seems clear that Maiar also could take Seen forms. Note that the Nazgul are obviously not Maiar and could presumably not choose their forms (not any more than you choose your clothes that is).
The Istari, being Maiar, would normally be able to change their form in the Seen, but the Valar forbid them and sent them to Middle-earth like old travellers.
I think that Sauron, even though after having lost the Ring, had his main form: his spirits form in the Unseen world. It seems that taking a Seen-form used some power and since he lost the Ring, he lost a large part of his power, thus becoming unable to take a visible (Seen) form.
From the quotes in the article, it seems that Sauron could not anymore take a 'fair' shape, one that would look good to the Free Peoples. For some reason Sauron, having lost a big deal of power, was not
allowed to take a fair form anymore. Clearly, there must have been some kind of 'rules' on which forms the Maiar could take, or at least it seems that taking a body something Good was harder for Sauron, being Evil. What exactly these rules are is not clear from the books.
Also, to answer your question: it's important not to forget that Sauron put a part of his power into his Ring, and without it, he obviously had less power. Continuing my previous reasoning, it seems like he had lost so much power, that he could not take a physical form for a long time. For that reason, it
seemed to the free peoples that Sauron was destroyed, although only his physical (Seen form) had temporarily be destroyed.
Okay, this post has become longer than I anticipated, maybe more tomorrow and congrats to all people who've read it to the end. I hope everything still makes sense though.