This is what NRS needs to do for MK10. I wouldn't say they screwed up the alternate timeline, instead they opened up a really good oppurtunity to progress the story in a new, fresh direction. Plus it's not all that difficult to revamp or develop those characters as you put it, just have a look at the fanfiction section of this site, if we fans can come up such great ideas with not too much effort, I'm sure NRS can come up with something better with the creative talent and resources they have. They just need to have that willingness to step into a new direction.
The thing is a lot of these fanfics revolve around taking and changing a character completely from who they are so that they fit, and when doing that you might as well just add a new character. Most of them, not ALL.
Also, another problem I have with this is that most fighting games have a core set of characters that are in every game. I know some of you guys are going to say Well there's a lot left to work with, but I'm telling you Reptile, Sheeva, Kano, Baraka, none of them are going to get the attention that most think. They never have, and in MK9 they had the chance to change that, but they didn't.
So realistically We have Raiden, Sonya, Johnny Cage, Scorpion, and MAYBE Ermac and Cyrax to work with. That's it though. I don't know I probably just disagree with you guys, but bringing in a sh**load of those characters and trying to make them work is just going to flop in my opinion. They need a good core group of about 15 to 20 of their classics and then bring in about 10 to 15 of the 3D era characters. As of right now they don't have that.
Also I really only see a few of these characters worth exploring, I'm much like Araknyd in that aspect.
My perfect roster for the next game is:
Scorpion
Sub-Zero (Kuai Liang) Cyber or not as much as I hate cyber
Raiden
Sonya
Johnny Cage
Jade (Woman in her ending revives her)
Smoke (escapes Quan using his demon form)
Sektor
Cyrax
Ermac
Liu Kang (Quan Chi and Shinnok's puppet)
Mileena
Noob Saibot
Rain
Skarlet
Quan Chi
Kenshi
(3D ERA)
Fujin
Tanya
Reiko
Kai
Sareena
Li Mei
Mavado
Bo Rai Cho
Nitara
Frost
Ashrah
Havik
Hotaru
Sub-bosses:
Drahmin
Moloch
Boss: Shinnok
I think that this would be the perfect cast for the next game.