At absolute minimum, the game engine would need to be completely replaced and improved. Although I feel that much more would need to be done.
I'll take an absolutely hard-line position with that issue. The engine's rendering and functional abilities would need to be far wider than what they were with the Odyssey engine. Its dated compared with other engines in the mainstream today.
I don't know for sure (and I could be wrong), but wasn't that engine made 2000-2001? For the time, it was a breakthrough in interactive world building, but its fallen well behind. Even at the release of the Sith Lords, it felt a bit old.
I'll give credit where its due: Obsidian integrated in certain improvements, among them being weather simulation and functional capes/cloaks. But these were mere band-aids when a transplant is needed. Weather should be functional, changing, and flowing at will - never stagnant unless for a good reason. Worlds should have day and night cycles, probably much different from each other. I'm using Oblivion as a model here, but even in that game there is always room for improvement (one thing that Bioware has up on Oblivion to this day is intricate dialogue trees)
NCPs should have active schedules and "jobs", in other words, they are scripted to live and act like people. They go to work, go home regularly, they interact and have relationships with other NCPs, they sometimes visit a friend's house or somewhere else, so on. In the dated game model, NCPs in a city walk around rather aimlessly in a rough pattern, and when talked to speak a sentence that is meant to stand for a conversation. Its always daytime, and the same NCPs can be relied upon to be aimlessly walking in the same rough patterns. To me, thats pretty weak.
After playing Oblivion and experiencing such a massive and detailed world rendered beautifully (I'll admit though, I'm playing on the highest settings, and I have plenty of mods), the whole concept of a "planet" being expressed with a mere seven or so modules/rooms is dead to me. Its old.
KOTOR was great, but any intended successor would need to be highly competitive in terms of interactivity, graphics, and storyline (and that last one is not much of a problem).
When comparing ... say .... Onderon from the Sith Lords, to the Imperial City of Oblivion, the Imperial City wins hands down in every possible category of rendering and interactivity (Onderon's architecture as shown always seemed a bit blocky to me; obvious reskins and touch-ups to Tatooine architecture models from the first game).