I'm much more interested in the ability to replay the story without having to buy a new game or loose all my stuff. As such I'd prefer the game reset my old pokemon to level 5. Same moves, same stage, same EVs and IVs. The legendaries would not be able to be recaptured and you would have to start with the same starter.
It would be interesting if Hard mode turned all trainer battles into Battle facility style battles in which all Pokemon are set at level 50. Leaving wild battles the same for leveling up.