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I'm not sure the letter dated 1958 necessarily represents Tolkien's final scenario here, as the idea is connected to Elrond meaning *Elf of the Cave...
... and not long after, Elrond is said to mean "Star-dome" (1959-60, Quendi and Eldar).
In The Shibboleth of Feanor (1968 or later) it was said that the names Elros and Elrond: "were formed to recall the name of their mother Elwing" with Elros meaning "Starlit foam"
And in The Problem of ROS (1968 or later): "Now Elrond was a word for the firmament, the starry dome as it appeared like a roof to Arda; and it was given by Elwing in memory of the great Hall of the throne of Elwe in the midst of his stronghold Menegroth that was called the Menelrond,..."
And in letter 345 (1972) Elrond meant "The vault of stars"
If a meaning "Elf of the Cave" is out, as it appears at least, my total guess is that the story went out with it.
Not necessarily so, I admit; but anyway.
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