*Please note-this is primarily an idea for LS players, though I have tried to accomidate LS/DS decisions into this somewhat. It's up to the developers to make the good/bad scenarios.
How's about this-you start out as Revan about 10-15 standard years after KotOR II, and you have discovered the weakness of the ancient "True Sith" in your wanderings beyond the outer rim of the Republic. These Sith discover you, and hunt you visciously, fearing that you will give their secret away. (As to the secret-I'd leave that up to the developers)
You must struggle and fight your way through their empire back to Republic Space, with the intention of alerting the Republic to this new threat so that it can be destroyed forever. However, Sith spies have put a tracking beacon on your ship, and you unwittingly lead the entire Sith fleet to Atris's former academy on Telos (which has by now more than 3/4 recovered), where the Jedi, under the jurisdiction of the Exile, Visas, the Handmaiden, and Bastila are regrouping. There are Padawans and newly knighted Jedi everywhere, and they all either hail your return or attack you, depending if you're light or dark.
Regardless, you tell the Council of 4 about the new Sith threat. As you do this, their massive fleet drops out of hyperspace, but does not fire upon the planet, instead choosing to occupy it and twist it to their own ends, shooting down any ship that tries to escape without the proper codes. (They're all infinately smarter than Malak ever was-especially their shadowy leader, who speaks only through holograms kind of like Goto, except he's acutally real. And maybe one of the actual Sith "species" from millenia past too).
The Handmaiden is enraged (she never seemed too capable at controlling her emotions to me) that you have brought this upon them, but depending upon a dialogue and gender choice earlier in the game, Bastila is either the happiest woman in the world or indifferent to your prescence. Visas and the Exile (who should have set genders and voices, I think, as Revan was a clearly superior character in the first game, and therefore should be granted the role of PC) are logical about the situation, and impart all that Jedi-gunk about fighting the dark side and how Jedi should act in defense and not bring harm to others. Blah Blah Blah.
You obtain the codes to escape the Sith through the Exile's Telosian contacts, and most of the Jedi make it safely to the world of Ithor, where the Ithorians have allowed their most sacred rule of no one ever being allowed to step onto the planet's surface to be broken for the sake of the galaxy. A temporary academy is set up. It's the perfect hiding place-no one would suspect the Jedi to set up shop on a world where they supposidly can't even land.
Anyways, the Council saddles you, (Revan) with the new responsibility of using this newfound weakness to destroy the True Sith Empire forever. They grant you the party of Bastila, HK-47, T3-M4, Atton (who has been somewhat trained as a Jedi Sentinel), and a very annoying young Jedi who is Padawan to Bastila. I think that her padawan should be one of those little green Yoda-like creatures, with Yoda's attutude early in "The Empire Strikes Back", yet still quite wise. He/she's a replacement for Jolee.
Carth is too busily trying to organize a defense against the Sith (who strangely enough don't go for Couruscant-they care nothing for the Republic, only the fact that you have their secret, and the other issue of wanting to exterminate the Jedi. As I said, they're smarter than Malak.). But they do officially wage war on the Republic because it tries (and fails) to get Telos back from them.
Canderous (Mandalore) is pretty open at this point-I can't decide what to do with him. I'm leaning towards getting rid of him.
Juhani and Jolee, you find out much to your chagrin, were killed on Katarr (*weeps for Jolee, even though he'd probably already be dead by natural causes by the time this takes place*), and Zalbaar (is that how you spell it? He's the cheiftan now, anyways.) lends assistance by assigning you one of his best Wookie warriors (you have to have a walking carpet). You are also to help Bastila train her first Padawan if you're LS and didn't kill her on Telos. She's way our of her league, but is obstinate as usual to your offers of help. Also, you really make headway into the Bastila/Revan romance started in KotOR I (if you're a guy) . If you're a girl, you can make sparks fly with another member of the crew, the rest of whom are up to the developers to create. I think it'd be neat to have a Yoda-like creature in the group, but that's just me.
Later, you pick up the Wookie warrior on a visit to Kashyyyk (sp?) when you drop by to see Zalbaar. Mission Vao (who is slightly more mature) is elated to see you if you didn't kill her in KotOR I, and joins your party without taking no for an answer.
You visit many (at least 8 total) different planets (and for the love of God, let us go to Coruscant this time!) in your quest, and either save the Jedi or ensure their destruction forever.
Some ideas for planets would be Sullest, Ithor, Coruscant, Nal Hutta, the ruins of Taris, and other planets within the boundries of the True Sith Empire that only Revan knows about to this point. All choices are ultimately left up to the developers.
As to technical issues, I think there needs to be better graphics, better framerates, better loading times, and less (read: WAY LESS) bugs than were in KotOR II. The engine needs to be updated.
So, what do you think? Obviously, many changes have to be made to allow DS players, but as my username clearly states, I'm overtly biased towards the blue end of the spectrum.
I don't know weather this should be the last KotOR-there seems plenty of story potential later on (say, about 3000 years into the future with the whole Darth Bane and the Jedi Army of Light thing). It's just too good a concept in my mind to kill after 3 games. Then again it could get boring, and it may be better to retire it before people start to hate it and let it pass on with dignity. I can't make up my mind.
Any add ons or modifications are welcome to be presented.