What is the goal in installing a window treatment? Do you need privacy, light control, or just want to add some softening/color/pattern to the area?

I prefer the rod and panels to be placed over the arch.

Yes, for your situation, over the arch. It’ll also be good for light control.

It's difficult to see how much space exists above the arched window, but if it's feasible, you could mount the rod to align with where the angle changes, on that wall.

I like the look of drapes above the arch...but you could probably easily use 3 tension rods inside the window casings. I recently did something like that.

Depends on the look you’re going for.

Tension rods above.