Just to provide some backstory, here's the general crossover characters that I've settled on.

If you're curious about a particular character combination, please feel free to discuss, or brainstorm.

I know that ExOttoyuhr and others have had some good ideas for alternate crossover scenarios, a few of which I've incorporated.* But the story's pretty far along in terms of characterization, and I'd like to get more into the details of plot differences and character motivations, at this point.

Note that the tale is set in the pony prehistory of MLP, with the idea being that the first age of Middle Earth was actually set in Equestria before the world was remade, so the ponies here are "ancestors" of the ponies from the show, like in Hearth's Warming Eve.

Princess Starfall, alicorn -- Prince Fëanor, greatest and most skilled of the High Elves -- OC -- Luna's mother

The creator of the Elements of Harmony, which contain the light of the original Two Trees of Harmony in the land of Alinor, and the greatest inventor and artist of the Alicorns. Like Feanor in almost every way, she is a Promethean character who rebels against the gods and leads her people into a hopeless war against Tirek. The princess of the Stars, she also created the Milky Way galaxy. Her people travelled across the sea and invaded Little-Equestria for the first time (then ruled by primitive unicorns) to make war on Tirek.

High Queen (name?), alicorn -- High King Fingolfin, Feanor's brother -- OC -- Celestia's mother

The princess of lightning, snow and ice, among other things, and the princess of the Sun (last fruit of one of the Two Trees of Harmony) before Celestia inherited the role. She pledged to follow Starfall into exile in an effort to heal the mistrust between the two sisters, and most Alicorns followed her to Fillyot, the chief castle of Chillyum in the northwestern-most realm of Alfalfaland, within sight of the mountains of Tartarus.

Luna and Celestia -- Galadriel -- character expansion
(Luna and Celestia are younger half-sisters in the fic) -- playing the actual characters

Luna and Celestia come of age during the course of the fic when they help create the Sun and Moon in the aftermath of the First Battle. Starfall and her sister (the High Queen) were estranged due to relationship issues (Luna and Celestia have the same father, but inheritance is matrilineal in this female-dominated realm).

As a result, Luna was the "red-headed stepchild" of Starfall's family, spurned by her mother, who awarded her the Moon-fruit because Starfall, who had created the original much more powerful Elements, had no interest in it. Luna created the Moon in honor of Starfall, out of grief for her death at the gates of Tartarus, whereupon Starfall's spirit burned away her physical body. Weakened by their ordeals, Celestia's mom inherited the High Queenship and passed the Sun-fruit to Celestia, who raised the sun for the first time. Thus began the Long Peace, aka the Siege of Tartarus, when alicorns settled in Alfalfaland along the western shores of Little Equestria.

Princess Glamoros (alicorn) -- Maedhros, eldest son of Feanor -- played by Rarity

Starfall's favored daughter, and the craftiest of the Seven Daughters of Starfall, Glamoros was the princess who most took after the goddess Gëmli, master of craftsmen and weavers and gemstones. She is also the most conflicted of the major characters, driven by her oath to avenge her mom and to shepherd her mostly haughty and vindictive overpowered siblings, the Seven Daughters of Starfall, alicorn princesses, including Luna and:

Princess Glow-Belle (alicorn) -- Maglor, brother of Maedhros -- played by Sweetie Belle

The kindest and most gentle of Starfall's Daughters, Glow-belle is closest to Glamoros. She is a poet and a singer and bard among the alicorns. She followed Glamoros through the ages in pursuit of their doomed oath to reclaim the Elements from all others. She is the youngest of Glamoros' siblings.

Princess Tiaraform and Supturene (alicorns) -- Celegorm and Curufin -- Diamond Tiara and Silver Spoon

The most arrogant and vindictive of the Seven Daughters of Starfall, they inherited much of their family's skill of craft and magic, and much of their mother's anger and fiery spirit, but less of her wisdom. Like many of their alicorn brethren, they look down with contempt on the earth ponies and unicorns of Alfalfaland, viewing them as rustic creatures of the dark forests and caverns.

Commander Dashion of Cloudfountain (pegasus) --
Turgon + Fingon + Ecthelion + Glorfindel (composite character) -- played by Rainbow Dash

Captain of the Pegasi on the Holy Mountain of Poniquetil, and heir to the throne of all Pegasi, Dashion left the blessed realm of Alinor with a substantial cohort of her people, out of loyalty to her friend Glamoros and drawn by the allure of new realms in the unponied lands of Little-Equestria. Settling on the coast at Wingyamar above the Great Observatory which later fell into ruin, she moved her people in secret to the valley of the mountains of Feathergrim, where they built the hidden kingdom of Cloudfountain, greatest of all cities at the time. She inherited the (contested) High Queenship after Celestia's mom died in sole combat against god-form Tirek, but since her realm was hidden in the clouds, this title was mostly unclaimed. Dashion chafed against the hidden nature of her realm, because of the conflicting desire to make war in defense of ponies (pegasi being the most warlike of the races then) but to save her society from the ravages of Tirek.

Flutterén the Fair, (pegasus) Princess of Derpiath and Alfalfaland -- Lúthien -- played by Fluttershy

The greatest of Tolkien's female characters, and unbeknownst to herself, one of the most powerful characters in the story, she is the daughter of the unicorn Hourglas (pony incarnation of the 12th Doctor) and Derpian, an immortal being in the form of a differently-abled pegasus, during a different era in time. As such, she is the heir to the native born ponies of Alfalfaland, particularly in the unicorn realm of Derpiath, where she was for centuries the only pegasus besides her mom. Having inherited immortality from her parents, Flutteren has to make a series of hard choices when she meets the earth pony Apple. Having pledged their lives to each other, Apple is sent on a doomed quest to steal an Element of Harmony from the Crown of Tirek in the depths of Tartarus itself. During the course of their quest, Flutteren: escapes the Tree-House of Cheerilorn by enchanting her hair; is befriended by Angel, the giant Hare of Bunnymor; rescues Apple from the dungeons of Discord's Isle, defeating Discord in the process; disguises herself as the vampire batpony Thuringwethel; sings Cerberus to sleep at the Gates of Tartarus; dances before the throne of Tirek, putting him to sleep; dies of grief when Apple is slain; sings the saddest song ever sung before Ponyos the God of Death in the halls of the afterlife, who, moved to pity, restores them back to life; helps Apple rally an army of woodland creatures to defeat the My-Little-Humans of Bronygoth after they stole the Tiara Strong, containing the sole Element of Harmony in pony hands, which she wore on her brow until they both died of old age in the forest of Osrslyiand before the entire subcontinent of Alfalfaland sank beneath the waves.

Dinkya of Derpiath, (unicorn) Last Princess of Alfalfaland -- Díor -- played by Dinky Hooves

Much-younger sister of Flutteren, born in the first age of the Sun and Moon. She inherited the Element of Harmony from Apple and Flutteren upon their death of old age, after the apparent death of her father in the sack of Bronygoth and the disappearance of Derpian into the forest of Lunamoth, whereupon she got her cutie mark -- tears, a symbol of grief. Cinnamon, younger sister of Apple and a warrior in her own right, returned to the forest of Derpiath in its waning years as a unicorn kingdom to protect her.

Apple of Lemonady, (earth pony) warrior chieftain -- Beren -- played by Applejack

Last survivor of the earth ponies of Lemonady, a land laid waste by the Battle of Sudden Smooze, which was subsequently taken over by the enchanted forest of Discordion, a perilous place populated by bat ponies and monsters. Apple became a wandering outlaw, pursued by the minions of Discord and Tirek. Guarded by the creatures of the forest, she became a vegetarian, the first among earth ponies to do so, until she was finally driven over the precipices of the Mountains of Madness into the Valley of Dreadful Dread, a changeling realm where no pony had let been and lived. She passed through unscathed to the Girdle of Whooves where she met Flutteren the Fair in the Forest of Ponibreth. This set her on a perilous quest to reclaim one of the Elements of Harmony from the Iron Crown of Tirek. Earth ponies had never before been suffered to pass through the enchanted kingdom of Derpiath, realm of the unicorns, where Hourglas and Derpian ruled, and live; much less speak to their daughter, the fairest pony in Little-Equestria.

Cinnamon of Derpiath, born of Lemonady, Apple's sister, (earth pony)
warrior and craftspony -- playing Mablung (grey elf) -- played by Apple Bloom

Apple's sister Cinnamon inherited the title Princess of Alfalfaland (and the Element of Harmony) after the fall of Derpiath. She dueled her erstwhile friend, Glow-belle, to a standstill in the caverns of Bronygoth before escaping with the Element when the Alicorns of Starfall sacked the kingdom, after the collapse of the Girdle of Whooves which created an impenetrable barrier around the forest of Derpiath, the principal kingdom of the unicorns (grey elves). Cinnamon was the close friend and traveling companion to:

Scûtalu Strongbow (pegasus) of Wingyamar, an emissary from Cloudfountain -- playing Beleg -- and the two of them came to be in service of the unicorn realm of Derpîath, where they sought out and fought as outlaws alongside Pinkamena of Píe for a time.

Pinkamena Diánbar, Daughter of Píe, (earth pony) warrior and chieftain, born in Chillyum -- Túrin Turambar -- played by Pinkie Pie

Daughter of the Pie family, her mother was imprisoned on Changorodrim above the gates of Tartarus for mocking Tirek to his face after she slew 70 trolls in single combat while defending the bridge of Fillyon at the Fen of Eeyech during the Battle of Unnumbered Feels, to protect the hidden location of Cloudfountain and allow Dashion's army of pegasi to escape. Pinkamena grew up a wandering orphan after the defeat of the High Queen, when the earth ponies of Chillyum were discorded and enslaved by Tirek, causing unicorns and their friends to be persecuted and flee into the hills. Travelling across Little-Equestria, Pinkamena struggled under a curse by Tirek and left a trail of disorder in her wake. She became the Chancellor of Neighzohall, the underground kingdom of the Crystal Ponies in Alfalfaland, which had been abandoned when its alicorn ruler Errowen Aludhwen (aka Pluto) was captured and enslaved in the dungeons of Tartarus. Pinkamena rescued Aludhwen in the woods after she escaped the dungeons, and again during the battle of Tumhirúb. Sought by her family, after Pie was presumed dead in the Hill of Slain Ponies, Pinkamena was placed under a spell by the dragon Glowring, who she later slew in the ravine of Ticklin, turning him back into a baby dragon, after which she picked up her talking sword, a cursed blade inherited from the King of Alfalfaland, and took her own life. She became immortalized in the constellation Pinkamena (sister to Orion), and her tomb remained undisturbed after the fall of Alfalfaland. She is prophesied to be reincarnated in her descendants.

Clover, (unicorn) orphan of Chillyum, pupil of Starswirl -- Tuor + Eärendil (composite character) -- played by Twilight Sparkle

Related to Apple and Pinkamena, Clover was descended from the unicorns left behind in Chillyum when it was taken over, first by alicorns under Princess Celestia's family, and later by discorded earth ponies in service to Tirek. After the destruction of Fillyot, seat of the High Queen, Clover's people (unicorns and earth ponies) fled to the hills, where she lived in hiding, until she finally escaped Chillyum via the Rainbow Cleft, coming to the abandoned realm of Wingyamar where pegasi once had lived. There she found a set of arms in the ruined Observatory which Dashion, in accordance with prophecy, had been instructed to leave centuries earlier; and was visited by Lyrmo, goddess of the Sea Ponies, who sent her Starswirl, rescued from the wreck of a coracle, to guide her to the hidden realm of Cloudfountain. Starswirl the Bearded, unicorn wizard, had been sent as an emissary across the sea to the blessed realm of Alinor where the gods lived, and knew Dashion; Clover became his pupil. Travelling east to the mountains of Feathergrim during the Long Winter of Alfalfaland, when Tirek's monsters invaded Little-Equestria, Clover saw her cousin Pinkamena from afar, travelling in the opposite direction, the only time they met in life. Upon reaching the hidden cloud city, Clover rose quickly in the ranks of the lords and ladies of Cloudfountain, becoming the most trusted advisor to Dashion. She counseled that they abandon the city and make for the coast, and a magic mirror was constructed for this purpose. Dashion was determined to stay and defend her city and people from the armies of Tirek. They were betrayed by Tripke, Lyre's daughter, the adopted niece of Dashion who, jealous of Clover's influence, betrayed the city's location to Tirek in return for promise of High Queenship over all Alfalfaland as Dashion's heir. Clover and Tripke fought over the wreck of the city during the Siege of Cloudfountain. Travelling to the sea-pony havens along the coast, Clover rebuilt the Great Observatory at Wingyamar, which was subsequently sacked by the Alicorns of Starfall after Cinnamon fled there, bringing with her the remnant of her people, including the Element of Harmony that Glamoros and her sisters had sworn to pursue. Dashion's daughter Spellwing retrieved the Element from the sea during the destruction of the Havens, and was transformed by the Gods into the first Phoenix, who carried the Element to Clover, who was far out at sea, seeking a path to the Blessed Realm of Alinor. With the Element of Harmony upon her brow, Clover travelled past the end of the Earth to the shores of Sparklonya upon Alinor, where she found the abandoned city of Starfall's people, and pled for help from the Gods on behalf of the three kindreds of Unicorns, Pegasi, and Earth Ponies. She was made immortal and sent back, her ship transformed into the Airship of the Evening Star, along with a host of immortals from the Blessed Realm who utterly destroyed the realm of Tartarus, turning it into a prison and causing vast upheavals in the earth, casting Alfalfaland into the sea. Glamorous and Glow-Belle, last surviving alicorn sisters who had held to their oath, stole two Elements of Harmony from the encampment of the Gods and escaped under threat of arms. However, the Elements burned Glamoros to the touch, and she cast herself and her element into a fiery chasm in the earth during the wreck of Alfalfaland. Similarly pained, Princess Glow-belle threw her Element into the Sea, and wandered the shores of Equestria singing sad songs forever after. And that is how of the original Elements, three came to be lost: one in the sea, one in the sky, one in the earth. The other three were broken in an attempt to heal the Two Trees of Harmony; but as Starfall prophesied, without the remaining Elements, the effect was incomplete: the Elements were lost, their shards thrown into the night sky above Tartarus as the Sickle constellation to ward off evil, and the original giant Trees of the Blessed Realm, which had once lit the night sky, produced a sole remaining fruit, a crystal which was later planted in the Court of the Two Sisters in the Everfree Forest, where it grew into the Tree of Harmony from the show.

* including, per a previous suggestion:

Sunset Shimmer as Saruman -- leaving Princess Starfall as a similar character OC, namely Fëanor / Fire Spirit. Sunset Shimmer and Starswirl the Bearded (Gandalf) are both ancient unicorns who once served Celestia and her ancestors in the Blessed Realm. Other antagonists include Discord as Sauron in his early incarnation; as a trickster and sorceror, played by Discord as himself in all universes, of course; Nightmare Moon as later Sauron in the Third Age, as a separate character; played by Luna, who starts to take on aspects of the Nightmare Moon persona, so this is also an origin story; Tevopal, Prince of Cats; Unpleasant, Mother of Changelings, as the demon-spider Ungoliant; and Tirek as Morgoth.