Yes this current engine is 50% of what makes KOTOR what it is to me, I would never ever want some sort of first person shooter engine.
Upgrades sure, freshen up the engine and all, but no new engine.
I would never buy KOTOR 3 if it was made on the Halo engine, I dislike Halo 1 and 2 a lot. I've bought them both to see what the big fuss is all about, and I still haven't found out, they are two of the most boring first person shooters I've ever played. Perfect Dark and Goldeneye still kicks the crap out of them. I'm tired of seeing people worship two games that do not deserve fame.