Looking at it from a project aspect, I note there is a long 1 in 40 down the hill, so lowering is undesirable.
ask the following:
is there any reason why the line could not be stopped at Maroondah Highway and the station starting over John St?
Is future stabling and/or maintenance required in the yard?
The line is severed at Beresford Road, do we need to run the line towards Coldstream for a future facility?
Is there enough room for an elevated section without affecting the listed building? (Yes)
Either you abandon the railway at Maroondah Highway and build a new station or you continue with an elevated line with bridges over John, Maroondah and Beresford if you want to continue to Coldstream.
You didn't mention the bus terminal, which is well used. That's why the suggestion was to have an elevated section/station extending over the highway, so that bus passengers could access the station from the existing terminal without having to cross the highway. The alternative would be to move the bus terminal, but to where?
Stabling is definitely required, to service the morning peak. Especially with the single track from Mooroolbark, but even if duplicated, you couldn't just rely on arrivals to form enough peak hour Up services.
Parking is limited at Lilydale, and needs to be expanded. I know from experience that if I arrive after about 8.45 I will not be able to park at the station and will have to go elsewhere, thereby missing my intended train, risking a parking fine, and incurring an even longer walk to the station. That's why it was suggested to convert the existing train stabling area to more car parking, and move the train stabling further out. Exactly how that would be done is open to conjecture, but it would possibly have to be on the far side of Beresford Rd.
Continuing to Coldstream is unlikely, although there have been suggestions of a maintenance facility. But in any case, if the stabling is to be moved out then the Beresford Rd LX would probably have to be removed. Once again, I would refer to Mernda, where the stabling is on the far side of Bridge Inn Road.
Ideally, as mentioned previously, the elevated line would begin on the far side of Melba Ave, thereby removing that LX as well, and allowing for the proposed highway diversion.