Although Hasbro would never do it for the reasons Jesse listed (competing with themselves, etc.), I think the lower price point, "bare bones" approach to Legends wouldn't be so bad. Like others have mentioned already, bring the price down to $5 - and maybe even differentiate the cardback more to make sure they don't get "mixed in" with the regular line, causing all sorts of headaches with price differences, stocking and all that. You could do a basic, silver and black cardback with just a "Star Wars" logo on the top and "Legends" below it. Heck, you could even narrow the cardback (I'm thinking of the old Super Powers days, where they had the regular line and then the "slim" cardback where it was basically just larger than the width of the bubble). That way, it would really be different from the main line (other than just the SKU) and we could hopefully avoid the stocking troubles there. Like its been mentioned, these are mostly figures that have been in circulation awhile - and are all repacks - so this line has to be gravy to Hasbro even at the lower price.
Next comes the figure selection, which has been poor in some cases. Like Jesse mentioned, we don't need that crappy, underscaled Grievous in that line when a nice new one is out in the Legacy Collection (as well as Clone Wars). We don't need three of the character in the same get up on the pegs at the same time. Plus, its an example of an old figure that now needs to be retired. I'm sure there are reasons why we still see some of these older figures, but to me - using Grievous as an example - once we have this vastly superior version out, retire all the ROTS ones. From now on, if you repack a Grievous, or "tweak" him, use this TLC version. Same goes for other main characters and troops. No more Cantina Hans, SAGA Cloud City Chewies, 300th or action feature Fetts, etc. Use the best versions, and leave those others in the past. We don't see the He-Man Luke repacked, start treating these other oldies the same way.
Then it comes the issue of if you want rare figures included or popular figs for kids/parents/casual buyers included. I can definitely see why collectors would want some rarer figs repackaged, but at the same time when I think of a title like "Star Wars Legends", I'm not thinking of Sio Bibble. I'd almost rather see figures like that sprinkled into the "greatest hits" portion of the main line, and really make the Legends line (if it is a lower pricepoint, targeted at kids and army building) just focus on the big guns and troops for the most part. I mean, even if they were repacks, I think a line filled with VOTC (Han, Luke, Leia, Chewie, Fett, Stormtrooper/Snow/Scouts, Yoda, etc.), Evolutions (Maul, Jango, Qui-Gon, Vader, Anakin, Padme, etc.), and random others (Clones, Pilot Obi-Wan, ARC Troops, TLC Grievous, etc.) would look pretty good as a lineup, and probably sell well - particularly around the holidays. Again, they'll never do this, but its fun to talk about.