I've never been satisfied with the amount of lore I've found on the Elder Council; I've always wanted to know more about it.
I remember being sooo disappointed at not getting more information when you get the opportunity to break into the Imperial Palace in Oblivion. We never even *saw* another member of the Council besides Ocato.
One thing I'm certain of is that they aren't elected to the position.
They seem to have legislative control, and they probably have a fair bit of power. They effectively dethroned Pelagius when he went mad, and had him shipped off to an asylum. And of course, they have the power to choose the new Emperor when the throne is vacant.
I recall mention, probably in "Brief History of the Empire", of periods when the Elder Council had considerably more control over affairs than they should have. Uriel VI was the first emperor in quite a while to *actually* have reign of the empire, I believe.