That’s a terrific idea Acbagel.

Making the prison heist a second act without Grogu turns his eventual rescue a lot more powerful. One thing I would do in this case is take some of those episode 3 scenes where Mando is noticing the absence of Grogu on the ship and pepper them throughout the second act. That way, the audience feels like Grogu is somewhere in the back of Mando’s mind and that it’s weighing down on him. This can also lend a different shade to the betrayal by the heist crew. Somewhere, Mando feels like he has no true “tribe,” for a lack of a better word.

I also agree 100% with Eddie that episode 3 would be the best ending in this case. It’s just so climactic. Sanctuary does feel more like a interlude or prologue than a epilogue. In your initial edit, the Sanctuary scenes did feel a bit like a traditional opening to the second episode of a show. It’s the calm after a storm, but with a ominous note at the end that sets up the rest of the story.

One thing you could do is crosscut the flashbacks with the final fight of episode 3. The action in both is vaguely similar, so it might not be too jarring. Then you can show the final flashback scene (the Mando finding child Din) right before Din hands the ship part to Grogu at the end of episode 3. It’s showing how he’s found a new family and continuing the discussions about Mando’s sense of identity in the first and second acts.