How about time for a totally new city in a totally new setting? Think of the possibilities in places such as in Eastern Europe, Tokyo, Hong Kong, or even Dubai, with new and original characters.
As much as I'd like to see VC or SA again (especially the former), it'll take more than a new engine and some coats of paint to make it worthwhile.
Well they can't exactly introduce any non-american city. Dubai would be very cool, as well as Hong Kong, but:
1. All the radio would be kinda fake, if you're in Tokyo,Paris or HK you really don't expect 10 stations in english (and only them).
2. They won't be able to put in all their billboards, ads, funny fake street names, fake tv-shows, radio references, DJ jokes and so on.
3. Dubai, HK and SA are too big, and in case with SA they at least have a ready-made city planned which only needs new paint and high res textures, in case of completely new city they need to create the thing from scratch and that will take another two years.
A problem with SA it was overpacked. So they will spend enormous amount of time redrawing and redecorating all the 3 towns and the countryside, but with new physics and stuff they probably won't put in Harrier, 747, and therefore a parashute as they can't even figure out how to put rockets and target lock on a simple police helicopter.
The only thing not quite good in GTA 4 (except for bugs and performance issues) is a storyline. It's a bit linear and missions are almost the same, also for some reason they've removed funny missions (micro cars, micro helicopters with explosives etc). Also the reputation thing as in "take a person to the activity place" is fun at first, but after you have alsmot all characters at "friend" status, you get 10 consecutive calls to take them wherever and it gets annoying.
Good thing about VC it's modest in size, so they can redraw it and proceed with better storyline and new features. And not necessarily it should be in the 80s, modern days will work even better. You got supercars, expensive boats, the whole porn industry, corrupt governors/senators/police, economic crysis and a lot more from this years actual news to work with.
Also if you look at the timing, the first DLC for GTA 4 on 360 will be available early next year, the 2nd DLC pack will be probably ready by mid summer, so alsmot exactly a year from today they will have to release a 2nd installement of GTA 4 for all platforms, and that's not much time to work with.