They needed a new script from the get-go. we need this set in the far future, but if you're talking about this specific idea of Aliens and Predators in a small town then maybe it could have worked on some level. I read Shane Salerno's first draft of the script, and it's still bad but it's way better than what we got. here's a few things that I liked:
1. The predalien gets in a fight with a few Predators and out of desperation, one of the predators fires his plasma caster, causing the ship to crash. Makes a lot more sense than just shooting randomly like an idiot, like he did in the movie.
2. The Predalien actually gets killed right then and there and the surviving predator activates a distress signal on the ship's computer, not his gauntlet. This is great because now we don't have to put up with the egg barfing crap, and the predator actually has no idea the aliens escaped until one kills him, so it makes sense why he didn't just blow himself up, right then and there.
3. Wolf shows up only because he was passing by and intercepted the distress signal. and get this: he looks at the security recordings and sees ONE ALIEN killing the last predator and decides to go after it. this would have made for a better movie. one alien vs one predator.
4. the human characters are given more screen time and character development, not much but with a little tweeking here and there I might have actually cared if they lived or died.
5. Wolf doesn't kill a single alien until he gets to the Alien in the high school. and get this: the Alien is actually aware of his presence and turns to fight him in an epic one on one. WOW, an Alien that can actually fight a Predator? is that legal?
6. we get a greater sense of the town's community: who knows who, how each character feels about the other. I mean it ain't much but if they had to go for this small town setting, it'd be nice if it actually felt like a small town community where everybody knows each other.
7. The script describes the Aliens as being absolutely brutal in their killings: tearing people apart, ripping them in half. Actual intimidating aliens.
8. The script describes the town as being constantly covered in fog. How cool would it have been to see Aliens and Predators in heavy fog?
9. The best part of the whole script is the part where Wolf: the "elite" predator, the most "badass" predator of all time, faces three Aliens like a boss and then.......immediately gets his ass ripped apart, limb from limb, piece by bloody piece. and I'm sitting there like:
Damn, it's almost like having one predator fighting a bunch of aliens in an Alien vs Predator movie is an unbelievably stupid idea.
If they had added a few more predators, developed the characters more, actually had some nice atmospheric shots and cinematography. this could have been on the level of John Carpenter's The Fog, at least. A B-movie, but a decent one. and I don't see how the budget would have affected any of this. Some of the best horror movies have been done with less money than what AVPR had.