Well, now that Bioware has confirmed that they are not working on Knights of the Old Republic III, that means that the most likely thing going on is that Obsidian is working on it already. But it's still being kept hush hush.
As far as what I'd like to see in KotOR 3, please bring back Canderous Ordo and HK-47 (and please use the same guys for the voices, they are perfect! ).
Canderous is so cool, you've got to love that Mandalorian fighting spirit! Definitely it would be good to have more of the story of the Mandalorians and their history, also it would be great if Canderous would run into some fellow Mandalorians in the story. It's always neat to see the interaction between such fierce warriors, and they're always ready for a fight with anyone that might insult them or set themselves up as enemies of the Mandalorians. They are always cool to have in a KotOR game.
And HK-47 with his memorable personality and attitude is another must. He's very fun to have around!
Also, I would like to see the story of the main character that the player plays as in KotOR (Revan) continued, so we can see what happens next to him. Some events that take place in KotOR 2 should be referred to in KotOR 3, for the sake of smooth continuity of the story between all 3 KotOR games.
As far as graphics go, either use a heavily upgraded version of the NWN2 engine (much of which has already be re-written from what it was like in the original NWN), or write a new engine with superior visual capabilities to the NWN2 engine. As long as it can handle the over-the-shoulder camera angles that are so important for lightsaber combat in the KotOR games, then I'm sure Obsidian will make an engine that will look great.
When designing the lightsaber combat system, please incorporate the actual Forms of lightsaber combat that Jedi Knights and sith use, Form III, Form IV, etc., into the animations and motion capture (if you use motion capture) that you use to depict lightsaber combat.
These various Forms used in lightsaber combat look quite a bit different from one another, and they all have strengths and weaknesses against other Forms. So each Form would have different base attack, defense, parry, speed, etc. values, and these base values would have modifiers applied to them depending on what type of Form the opponent was using (and the skill level each character has in the particular Form he is using). And naturally each Form would have it's own special combinations and moves that a character could attempt. This makes for duels that are varied both visually and tactically. It not only looks cool, but it's interesting to see how different Forms match up against one another in lightsaber duels.
And, of course, there are many levels of skill involved in each Form; a Jedi Knight may have mastered Form III, but only know the basics of Form IV, for example. This would give many different opportunities for character skill customization and advancement in each of the specific lightsaber Forms in Knights of the Old Republic 3.