While I understand the reasons for using equity in place of cash to compensate employees and contracted help, be aware that it is usually very expensive -long term.
The first step in the process is to agree upon values.
If you can agree on these, you have a starting point.
My answer to the second half of your question (Should it be based on meeting key milestones or number of hours spent?) is: use the same measure as above and award equity based upon that. For example, if a person is doing a specific project - then they should receive the agreed upon shares when the project is completed. People who contribute hours should get shares at intervals of hours.
NOTE: With the exception of the exchange of stock for capital (yours or the investor) all of the other transactions are likely "taxable events" and may create a tax liability for the recipient.
If want input on your specific situation- contact me directly.
Your story scares me, as well as others I`d imagine. To have 2nd round financing come in and dilute your shares to worthlessness is concerning, but perhaps it was necessary. Anti-dilution measures can help protect initial investors but that might prevent the 2nd round financing altogether. Maybe some of the SuN members know what type of anti-dilution measures to look for.
Valuation is based on future net income. Nobody here can give you a reasonable valuation without seeing projections. Remember, valuation is typically a "multiple" of NI. This multiple will vary based of industry, mgmt., growth, etc. If you project NI of $100K in 3 years and you feel the company should have a multiple of 10 then your company is valued at $1M in year 3. Use that to work backwards into how much equity a person should receive now given required ROI`s for that investor over the next 3 yrears. Say you value the architects contribution at $20K in todays dollars. Let`s assume this person needs 50% ROI yr/yr to compensate for risk. Then the equity this person should get now is ($20K*1.5^3)/$1M or 6.75%. If only it were that easy......