Odin slumped sulking on his throne, listening to his disobedient son telling him of his successful completion of Bor’s genocide of the Dark Elves, and of the long overdue death of the Jotun cuckoo.
For the first time, it occurred to Odin that there was a drawback to Loki’s death: Odin could no longer blame things on him. His own failed schemes, Thor’s pathetic failures—Loki had been such a useful scapegoat.
Odin wearily pardoned Thor instead of banishing or executing him for committing treason. He would be out of pawns to play if he followed through on the laws he himself had made.
Then as Thor thanked him and turned to leave, inspiration struck. A way to continue blaming Loki.
Odin did not use his power of casting illusions as often as Loki had, but he could do it, of course. It was basic sorcery. Testing, he cast an illusion of his kidnapped Jotun prince over himself and looked down at the result.
Excellent. He then spoke aloud, experimentally, to see if he could also feign Loki’s voice.
“Oh, no,” he murmured. “Thank you.”
The sound was perfect. Excited plans ran through Odin’s mind. He would commence at once on evil and mayhem beyond even his usual deeds, and when—if—he was called to account for it, he would cast an illusion over himself so that he appeared to be Loki. Then Loki would take the blame and Thor would run amok through the Nine Realms seeking him, while Odin continued to reign in Asgard and escaped retribution yet again.
Chapter 2: How Loki's Association With En Dwi Ghastly Could Make Sense In Continuity
Despite my efforts I found out what happened in this movie. It was even worse than I expected, which is saying something. So here's how it could make sense.
Mere weeks after Loki’s death, Odin found that Asgard was completely falling apart. For the past millennium Loki had done most of the actual work of ruling Asgard, such as maintaining Asgard’s magic, making treaties, running the day to day business of the palace, and so on. After his attempted suicide, Frigga had taken over most of these duties. Now that both of them were dead, everything basically collapsed and there was no food or anything in the palace and everyone who worked there just wandered off and Odin was stuck wandering the Nine Realms in search of shelter.
Odin did still have the magic trick of casting an illusion to make himself look like Loki, and so, remembering the way a certain sleazy criminal had leered at Loki, Odin cast the illusion and went to En Dwi Gast’s orgy satellite. It meant Odin had to endure Gast’s very kinky desires, which was horrible given how repulsive and unskilled and unhygienic Gast was, but Odin literally could not find any other way to put a roof over his head because he is that incompetent.
One day Odin’s illusion faltered and Gast discovered that instead of banging the exquisite younger prince of Asgard, he had been sticking it into a wrinkled old man. He was so horrified that he didn’t get another erection for five hundred years.
Then Thor showed up wanting Loki's help. As usual, he requested it by brutally torturing the man he believed was Loki. Convulsing with electricity, Odin reflected that maybe, just maybe, teaching Thor that torture was noble and effective might not have been the best decision.
Odin gave in, but since he wasn't actually Loki his incompetence meant that Thor's mission failed and everybody concerned died.