Hello MrT
1. Tolkien used to make up his own stories to tell to his children.
2. Tolkien used to make up his own stories to tell his children.
Both are fine.
You can "tell someone stories" or "tell stories to someone". If the indirect object (here, "someone") follows the verb, it's not usual to use a preposition with "someone"; but if the direct object (or rather, cognate object, in this example) follows the verb, you do need a preposition with "someone".
Similarly, you can say "stories to tell someone" or "stories to tell to someone". I don't find much difference between the two versions; except that perhaps the version with "to" has a greater directional sense (i.e. the "to" emphasises the story-telling relationship).
All the best,
MrP