Not sure how insane doing it would be, but if it was me, I believe optional protected memory and pre-emptive multitasking extensions (if an extension approach would be even possible for those) would be two features that would be particularly cool to get going on a new update. Basically, any Pink idea would be cool. And, of course, as others mentioned, pushing the RAM limit up.
I also wonder if there could be potential for some sort of terminal app?
But of course, I personally find getting more machines to boot our current OS 9.2.2 more interesting than adding such new features first. But afterwards... then hell yeah, that'd be awesome.
Protected memory is more or less impossible to pull of on OS 9, The OS has shared data structures (Quickdraw in particular) which means you could not totally isolate an application without locking it out from using the toolbox.
The Carbon API remedies this- but unfortunately the actual Carbon implementation on Mac OS 9 sits on top of the Toolbox so it's just API level compatibility.
Preemptive multitasking on the other hand is already available (and exposed to the public API) on Classic MacOS, you probably know that already though- MPTasks are truely preemptive.
But I guess you're talking about making all processes preemptively multitasking, I believe the main hurdle here is once again shared data structures and nonrentrant code, for example quickdraw wouldn't be all that happy if the grafptr changed while it was drawing but I think the biggest problem is the 68k emulator, there is just one instance of it and it's used all the time in all software... but one thing that Apple could have done and that I don't know why they didn't was to yield on blocking system calls, there was this POSIX library for classic Mac OS written by Matthias Neeracher I think... but I can't remember it's name though... but it did exactly that on blocking posix calls and it worked pretty well... it's still cooperative multitasking though.
And another thing would just be to not block when the menus are down- I know there been hacks to avoid that before but they cause both graphical glitches and compatibility issues with tons of apps.
If anything I believe the most reasonable option would be to write a new API that builds on MPLibrary and tries to avoid MacOS as far as possible... but that would of course only work for new apps.
Or you simply have to get MachTen, at least the Unix environment is preemptively multitasking there.