I think you are wrong in about half of your points.

Tons of new assets would have to be created. Even if you had all the original assets, rebuilding them to high definition would require basically junking the old models and starting over.

The tech demo looked horrible. All the stylization of the original was lost, and a lot of the charm went with it. Could you see Miss Cloud in that graphical style? The humor in the game would just be gone.

Most fans wish the Compilation never existed, and would consider a retcon that included the horrible additions to be a complete betrayal.

Very few fans want the script or areas touched at all. They just want the game the way it was.

Getting the mechanical systems working would be the absolute simplest part of the project. Almost all of the time and effort would be spent on the graphics.