I think we should not have the balrogs exposed until the valar come to Utumno to make war. But somehow I feel that the discovery of the other beasts is a kind of weak trigger. It's no news at this stage that there are a lot of beasts around; I think we had Oromë and Tulkas hunting monsters in episode 8. I agree that the monsters are a part of the reason to go to war, but not central. The war is inevitable because of Melkor's desire for dominion and the chaos caused by that again and again, not only in Middle-earth, but among the Ainur. We have the rebellion of Ossë in episodes 9-10 and Aulë creating the Dwarves in episode 11. In both cases the story ends well. That is good, but the more things turn out for the good, the less we need a war. At this stage, the story doesn't need something good to happen. It's not good for the story to give the Valar the Ents and Eagles right now. It would be better if something bad happens.
This episode: First, we can't just leave Ossë. Early on, we could perhaps show Ossë rejecting another invitation from Melkor? I don't know, it's just an idea.
Other than that, I think we'll do fine with Aulë and the Dwarves in this episode. I suggest we begin with a scene in which we are reminded of Aulë's impatience. Then we do the transgression. We should give it some time - it would not be good to rush over it. A longer, more focused series of scenes concentrating on how Aulë goes to his secret workshop, gathers material, prepares and shapes his children, building up to the sudden vision, could be quite good.
Also, we should have a good portion of frame in this episode. Not only because of the Dwarves but because we must have a scene between Estel and Bilbo. Estel could have a lot of prejudice against the Dwarves, but Bilbo could, smiling, sensibly talk him out of that.
(So I think that the aftermath of Aulë and the Dwarves should happen next episode (12). Aulë confessing to Yavanna, Yavanna going to Manwë, and how they talk about what was in the Song. I think that Manwë should end that conversation by saying that the Ents and the Eagles shall awaken at the same time as the Children, not before. The Eagles are associated with hope to such a high degree, if they turn up now, everyone will feel things are going to turn out well - and that's not a feeling we need. Besides, they can't just show up at the whim of the Valar - they are in the Music, but not of any solo from Manwë or Yavanna. Then we have the council where Mandos speak of the awakening. At this point, I suggest that Mairon finally feels that there is no question that Melkor is the stronger and that a future on his side is the best road to take. And so he slips away. Maybe this defection isn't noticed right away, I don't know. We seem to lean towards having Sauron's path to evil be as subtle as it can be, so maybe the Valar don't notice him defecting at all, or if they notice it, they regret it but don't see that it should have any special consequences. Perhaps they could take it as a sign of the general chaos, though, and be downcast by it. And maybe, in the light of what happened when Ossë was rebelling, they fear what Mairon can do as a rebel. Curumo could speak up and describe his fellow Maia's words of late. (I think Mairon could defect either before or after the Valar makes the decision to go to war, but preferrably before).
And then (after a lot of talking) we must have some time showing how Mairon comes to Melkor and is set up as lieutenant of Angband, given some of the balrogs to command etc.), and perhaps some more of Oromë fighting the hopeless fight against the monsters.