I'm in no way an expert in modding but it strikes me that a community project using a free to license game engine (such as UDK or CryEngine3) and a design brief to aim for realism would answer many unsolved problems.
You wouldn't strip the game assets out of SH you would use them as a platform to improve, better materials, higher polys, DX11 water effects, advanced lighting. Hell with an MS Kinect you can even make motion tracking for the animation!
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