I was just thinking about this. I heard this song The Lament of Eustace Scrubb by the Oh Hello's, and I thought that if I ever get to make VDT (big dream ), I would like to use it, because it seems so appropriate. It seems a good credit song, but I wonder if it would work in the actual scene of the undragoning. It might be unusual for Narnia film - a scene with a song that has lyrics, and I even wonder how to do it without it looking a) like a nice Youtube fan video or b) cheesy.

This was what I was thinking. In my mind, the scene was mostly in animation, because I can't really imagine the CGI for live-action that well.

I would have it begin with Eustace speaking to Edmund after the undragoning, and then the camera pans to something that is also in the scene around the campfire, before the undragoning, thus transforming to a flashback of what Eustace is speaking about. The song might start here. It is early dawn, and Eustace sadly looks around the campfire at Caspian, Edmund, Lucy, and Reep, who are all sleeping. He gets up to walk around.

I'm wondering how to introduce Aslan. I think that while walking, Eustace can either see Aslan's feet, or Aslan's feet can appear walking by him (kind of like the HHB scene with Shasta and Aslan). Then the second verse of the song, at the "Father, have mercy" part, we see Eustace and Aslan's eyes meet, and Eustace drops his. Aslan tells Eustace to undress himself. Eustace scratches a few times, and the dragon skin looks ugly but feels a little fresher, but Eustace looks at his throbbing, swollen arm with the golden band stuck tight. This happens in the song during the first verse until the "someday" part. At the silent part, Aslan can approach Eustace, Eustace lies down, and then as the music crescendos, we see Aslan tearing the dragon skin. Eustace goes to the pool, and then we can see him swimming, and the transformation takes place... in a nice, non-cheesy, but quick way. He can look glad (not unbelievably slappy happy, though, lol), and then slips the golden band off his arm.
This takes place during the louder part. Then when the music gets quieter, Eustace can get out of the pool, "a real boy!" again, look around and notice Aslan is not there anymore, but he can see his old clothes by the pool. He gets into those, and just as he is about to go, Aslan comes from behind, lick his forehead, and then walks away. Eustace then runs back the same way he arrived and finds Edmund.
I need to reread the scene to verify the specifics, but that was what I basically thought about, if pairing the song above with the scene.

I think that the characterization in the scene is extremely important as well: Aslan needs to appear golden, rich, warm, terrible, fierce, and real, and I think it's important that Eustace first has a timid demeanor that grows into joy after the undragoning. Also, I think it's important that the new boy Eustace appears less of a snob - Will Poulter did a good job of that, I think.

EDIT: Thanks, De_De, for quoting the scene in your post! It reminded me of the part where Aslan asks him to undress and then Aslan does that. I'll amend what I had said with that.

Interesting idea Aslanisthebest.
Here's my idea. I would try to make it as close to the book, so it probably turn out to be a little movie in itself, buuuut thi is how I would do it.

the book
Edmund made sure that his sword was in its place and then rose to investigate.
He came down softly to the edge of the wood and the dark figure was still there. He saw now that it was too small for Caspian and too big for Lucy. It did not run away. Edmund drew his sword and was about to challenge the stranger when the stranger said in a low voice, "Is that you, Edmund?"
"Yes. Who are you?" said he.
"Don't you know me?" said the other. "It's me Eustace."
"By jove," said Edmund, "so it is. My dear chap -"
"Hush," said Eustace and lurched as if he were going to fall.
"Hello!" said Edmund, steadying him. "What's up? Are you ill?"
Eustace was silent for so long that Edmund thought he was fainting; but at last he said, "It's been ghastly. You don't know . . . but it's all right now. Could we go and talk somewhere? I don't want to meet the others just yet."
"Yes, rather, anywhere you like," said Edmund. "We can go and sit on the rocks over there. I say, I am glad to see you - er - looking yourself again. You must have had a pretty beastly time."
They went to the rocks and sat down looking out across the bay

this I would all keep the way it is in the book
Eustace starts talking

"Well, last night I was more miserable than ever. And that beastly arm-ring was hurting like anything

and here the scene slowly changes and we see everything through Eustace's eyes. We see his dragon arm with the bracelet on it and him trying to scratch it off. Then he hears a rustle, looks up and we see Aslan walking from the trees (I alwyas imagined this scene to take place in a wooded area) with the moonlight on him. Eustace closes his eyes and the screen turns black (since we're watching everything through his eyes.) Aslan tells him to open his eyes and we see the pool and garden.
Aslan tells Eucase he may bathe, but he must first undress (mind you Aslan does not open his mouth). So Euctace starts tearing the skin off and he takes it off, comes to the pool and you see his reflection, but he is still a dragon. So he does it again, but he is still a dragon.
Then Aslan comes up and here he already speaks

You will have to let me undress you.

Euctace lies down, and now the camera is looking down the dragons body. Aslan makes one scratch and Euctace groansmakes a dragon noise. Aslan keeps on peeling, then the camera switches to where we see Aslan taking the dragon skin and shaking it and throws it into the water. Out comes Eustace in new Narnia clothes and not wet at all. He comes up to Aslan, Aslan looks him straight in the eyes and then the scene changes again and we see Eustace and Edmund sitting on the bay. And Eustace says:

And then suddenly I was back here. Which is what makes me think it must have been a dream.

That's the way I would like to see it Of course with nice music in the backround

I think I'd start with dragon Eustace picking at the armband, perhaps with a shot of the sleeping camp in the background. He looks up to see Aslan walking by, and he follows to the moonlit pool, which looks cool and inviting and a bit magical.

The dragon starts forward, then looks back to see if the lion approves. Conveying 'you must undress first' without words will be tricky. Perhaps just leave it with Aslan staring at Eustace and Eustace reaching up hesitantly to begin scratching away the skin. It comes off in light, almost transparent flakes, and we cut to a full skin falling to the ground and Eustace bounding forward. Then he looks down, and tries again. I'd do a short montage of scratching and the skins piling up and increasing frustration on Eustace's part, and then a voice-over of Aslan: "You must let me undress you."

There's a close-up of Aslan setting his paw on Eustace's dragon shoulders, and one of Eustace closing his eyes in anticipation of the pain, and then a sound like roots being torn out from the ground.

At this point I'd cut to boy Eustace in Narnian clothes meeting Edmund and explaining that Aslan then threw him into the pool and cut back to the final skin looking hideous beside the others and a smooth dragon splashing in the water. He goes under, or a sparkling wave crashes over him, and we see boy Eustace in the pool.

The actual transformation would be quick, so I'd then linger on the conversation between the cousins just a bit so we can see the change in Eustace and his gratitude to the lion.

Take a page from the BBC version. Have Eustace shown trying to remove several layers on his own and then have the camera pan away maybe to the reflection of his face and/or Aslan's followed by a voice over and the sound of ripping and a loud splash. Then have Eustace's human head pop up out of the water.