Removing the tree and then using a raised bed with landscape fabric and a layer of gavel under it will solve the problem. The poisoning comes from the walnut roots as well as the leaves, etc. If a root cuts through the roots of the lilac, the problem will eventually show up. I had a walnut start growing near a rhododendron bed. It started killing off the rhododendron branches before I saw it. I killed the walnut by girdling it and dug down around the rhododendron beds with a grubbing hoe and removed all roots that were coming into the rhododendron bed. I was able to save the bed. The walnut took about 5 seasons to die, but it was depleting its roots while doing this. Steve Henning

The rule of thumb is that you can cut about 1/3 of the leaf area off at one time. In actual practice some people cut them back to a stump. It the plant is healthy, it will usually come back in either case. If it is in too much shade, it will come back a little spindly anyway. They need some sun to keep their shape and bloom. Prune immediately after the blooms drop to give it the most time to grow and form next years flower buds.

Living in NH, I'd be mighty surprised if you didn't have acid soil. I think the whole state (as well as all of VT, MA, ME, and some of NY state and southern New England) has acid soil. The one exception would be next to a new source of concrete, which will leach into the surrounding soil to make it more basic (less acid.) If it were my plant, I'd either move it now when it has no leaves, or I'd wait until next year when it's really made some progress and protect it for this winter in its current spot. Another thing to do is to check out the hardiness of the variety. If you bought it many places, it may not be hardy (both some of the varieties I see in local nurseries and in the big box stores are rated for zones 5b and 6, and it's not worth trying to keep those alive in zone 4b or 5a, IMO.) I've given you a source to check out hardiness ratings. You type in the variety name and it will give you info on that variety. A light pinebark mulch would be great since rhodies are shallow rooted and like even moisture, not wet, but not really dry. They also would like the added organic matter. Here is a link that might be useful: Rhododendron Society Database Search

Yes, they can be pruned, but regular pruning to keep one within bounds is really not the way to go...better to have a shrub that reaches an acceptable mature height for your site. Rhododendrons come in all sizes and it would help to know the name of yours before deciding if it will potentially be a problem...do you know which rhododendron this is? Pruning is best done immediately after flowering. These set their buds for the following Spring in Summer; pruning in summer will remove the next seasons flower buds. If the plant is young like yours, you can guide its growth without pruning, merely pinching the leaf buds at approximately the same time you would be deadheading spent flowers in late Spring. As the leaf buds, which are slimmer and pointier than the fat, blunt tipped flower buds, begin to elongate and start to unfurl, take your fingers and pinch/break them off. This will encourage more branching lower on the plant - the result being a more compact, dense shrub.