My preference is for the Trial to take up the first Act (so, 1/4 of the way through), and for the rest of the episode to be more elf-centric, with the story of Melkor gaining trust being the Valar storyline. That way, it will seem cohesive, and not like we switched plots at the midpoint of the episode from all-Valar to all-Elves, but rather can weave both storylines together.
That way, the 'trial' isn't limited to a bunch of people sitting around talking, but we can see what actions Melkor takes to make his point, and how the opinions of (some) of the Valar change from the moment he was released until after they see his behavior. I think that having the Trial last the entire episode constrains us not to let the Valar do anything accept sit in judgment throughout this episode, with us bouncing back and forth between elf storylines and that. It seems....a waste of an episode to shackle the Valar to their thrones in the Ring of Doom like that. I'd rather keep the spirit of a trial by having Melkor on 'trial' throughout the episode, and only be granted wider freedom at the end of the episode as the resolution of that issue...but not a whole episode debate about whether or not to give him a chance.
Ray, the compression is in the original text. How we choose to tell the story is an open question, but we are certainly not constrained to leave things out or gloss over them. We have an hour of television to set up whatever we want to see with the release of Melkor. In the text, the elves are sitting at the feet of the Valar when Melkor sees them and hates them (but decides to hide that and dissemble instead). He is constrained to Valmar, but a sentence later he has free rein of Valinor. We're taking a handful of sentences and making it the plot for a full hour of drama. We don't need to be expedient there. We just need to figure out our goals and make the appropriate choices.