It's already being done, pretty much constantly. All the remakes and casual games - most recently prince of persia (original) in 3d and that commando, X? The one with the green guy and extending arm.
Then you've got lower end than that in the forms of Peggle, all of Wildtangent games etc.
It's pretty much what I do. And its not as fun as you might think because anything new is automatically a risk - they don't just downsize the engine but any creative thought as well.
There's less stress than a AAA title because the devtime is shorter, but not much less.
Low sale price high turnover is the business model.
More interesting are the potential homebrew access points in the evolving direct download systems. How about downloading a new map or mod for Quake from Steam? Or a map for <insert recent FPS here> from Xbox live? Just remains to be seen if the big console manufacturers want to open their frontends that much.
Can't see a problem with steam though . . .
Baker, I can't remember about .ent files for AguirRe's engines, but its bound to be in the documentation on his site.