Hmmm... Don't know where to go with this one... I guess if you wanted a modern PS2.5 or something with reasonable backwards compatibility and familiarity...
For starters with Sony's currently available process, the I-32 would probably commercially viable (as long it's going back to a discrete processor), so and I-32 would be mandatory...
A full set of combiner ops (the standard 13-14 blend modes, hopefully as fast as the current alpha blending), a cleaner method for LOD calculation/MIPMAP selection, 12 or so MIPMAP levels instead of 6 (depends on if texture size support is increased), 2K texture support, more arbitrary non-pow2 texture support (probably not as necessary)... There's a lot more I'd like but I could just live with that.
One minor hack would be perhaps to increase the page buffers to like 64-128KB. Keep the 8K alignment for compatiblity and familiarity but hopefully eliminate some of the performance penalties (or reduce them) of the page breaks...
As for the EE, the modifications I think would be more drastic. For starters, lose the 5900 and go with a more robust core like the 20K or 24K (preferable the 20K), but keep some of the EE enhancements (128-bit GPRs (with 8 banks of shadow registers!
), MMI, UCAB, WBB, and of course other necessities like DMA, SIF, etc). This would give the EE a more robust core to work with, with REAL caches (32K/32K+256K L2, or do away with the L2 and incorporate 8-way 128K/128K L1s), and a real FPU as well (and keep MIPS-3D ASE from the 20K on it as well)... Increase SPRAM to around 128K and keep both VUs but make them symmetrical (well VU1 would not have Macro mode), and increase their mems to 128KB respectively. It'd be really slick if the VU's could DMA to themselves as well (dunno what significant changes that would incur)... And perhaps a hardware clipper somewhere in the GIF would be nice.
The IOP would be interesting... I've never seen an R3K over 80MHz, but I'd like it to be in the 100-200MHz range. Probably replace the LSI core with a Toshiba TX-19a or TX-39 core... You get the benefit of MIPS16e support and a more DSP like implementation. Plus you get a MeP friendly platform, so you can replace the GTE and MDEC with custom MePs to emulate that functionality and even more importantly have a lot more processing options in IOP mode...
Of course main ram would be upgraded to 128MB of at least PC1200 (perhaps quad channel as well), with the EE running around 1-1.2GHz and the GS running at around 300-600MHz... The WBB and UCAB (on the EE) would probably need deepening to deal with the longer latencies though... Probably up the IOP and SPU ram to 8MB each as well...
Well that's my ¥2