Now that I have finally listened to the last "session" (trying to catch up my reading or Jonathon Strange and Mr Norrell) I can comment and build on what the hosts talked about last time.
I think this episode needs to be approached completely differently in terms of frame and main story mostly because of the relationship the elves have with Melkor. The Valaquenta states " Last of all is set the name Melkor, He who arises in might. But that name he has forfeited; and the Noldor, who among the elves suffered most from his malice, will not utter it, and they name him Morgoth, the Dark Enemy of the World."
How on earth is Elrond (who was raised by two of the two of the sons of Feanor who are Noldor, was shield bearer to Gilgalad the high king of the Noldor in the 2nd age and married a descendant of the Noldor, Celebrian) going to give him the treatment we want from this episode. None of the elves in Rivendell will even utter his name (Melkor) let alone give him a sympathetic story.
I feel that the best way to handle the episode is to have the frame story and Melkor's story run in parallel with no narrator and how both stories progress will depend upon how far we want to show Melkor's descent towards the dark lord he eventually becomes but even that will be not to a great extent as we want to show a mostly conflicted character with flaws, not altogether evil. To do a sympathetic portrayal and to have the two stories run in parallel, Melkor's story needs to be from his perspective (sorry Gabriel).
So what is the story?
Let's have Estel finding a riddle about some treasure that Elrond holds dear and then heading off into the wilds around Rivendell to find it, a clearly foolish move for a young boy. The treasure could be something from his dearly departed wife (take that however you want to) Celebrian, which allows us to bring in some of Elrond's backstory. Estel takes a literal interpretation of the riddle which leads him away from Rivendell but unbeknownst (is that really a word?) to him the treasure is not physical and resides within Elrond's heart or memories. This will clearly mirror Melkor's quest for the flame imperishable. Melkor's meeting with Varda can be mirrored in an encounter that Estel has on his travels.
In the middle of the episode the story has to show Melkor's descent into Arda and his joining in the creative process and maybe going through the whole "they don't understand me" adolescent thing as long as it is not too puerile. One of the other threads had a great suggestion about Melkor interacting with some of Aule's Maiar (including Sauron) to solve an issue. This could be related to the melting point of metal and the creation of the forge, obviously associated with Aule and is something that Aule embraces but maybe Melkor feels that the idea for extreme heat is his alone and he forgot to take out a patent.
Estel's journey needs to mirror Melkor's and both have to lead to folly and maybe arrogance and the climax may be that they surprises themselves by a violent and unprovoked reaction, the lesson being that the desire for a thing that you do not understand can lead you down the wrong paths.
I don't even think that there should be any reference in the frame to Melkor because the elves only call him Morgoth and that name should not be introduced until it is clear that Melkor is going bad. The frame should just be Estel's journey and let the viewer draw their own conclusions.
This whole approach will avoid the "frame within a frame" dilemma.
As to the relationship between the Valar and Melkor I see this as being a solo episode for Melkor with not much interaction. Melkor is a loner and feels himself to be self sufficient as he has a part of all the gifts of the other Ainur, in other words, he doesn't need them to be complete and he does not interact in the music making in the halls with the other Ainur. In the same way in Episode 2 that the Valar find that they are interacting with each other in ways they do not expect we should show Melkor starting to tinker at the edges of the other's creations and maybe showing things getting out of control and coming to ruin which was not his original intention. He may also discover that he has a surprisingly huge amount of power. The interaction between Melkor and the other Valar needs to start the same way as in Episode 2, but Melkor refuses to compromise and stays the valar of extremes and feels himself to be right, thus we see the beginning of pride.
As to the technical issues, I feel the visuals should be the same style as in episode 1, otherwise the audience might not understand that Melkor's story starts in the time before the world. As to how to visualise the void, I think we need to show the blackness around Melkor and the Timeless Halls receding into the background but always shown. This will get across the point that he was searching in the wrong place for the flame imperishable and that without Iluvatar there is nothing, literally. Obviously void is totally black (or is it?) but to portray it it needs to look more like a dark fog, the depths of the sea showing little visibility comes to mind.