It'll be a new Level 1 character, regardless of how they handle the Revan/Exile storyline. After all, you can do an expension for the PC, but not for the X-Box. How would you keep a character without some kind of auto-Leveling a la Hordes of the Underdark. Besides, it's much more difficult to come up with high level enemies. Everyone would be like Malak. (Sion and Kreia can't hold a candle to him.)
The story line left enough room for whatever storyline you desire in KOTOR 3, regardless of DS/LS ending. They're almost the same ending, with one slight exception which is easily corrected with the appropriate storyline adjustment.
I think there will be a power vacuum with the core of the Jedi Order and Sith ripped out by the end of KOTOR 2. Therefore, there will be a brand new Jedi Knight/Sith/Force Sensitive who will be recruited by both the Jedi and Sith to rebuild their respective orders. If Revan or the Exile appear, I hope the Story adjustments are more than just cosmetic. Why did they even bother?