I prefer this over another prequel that demystifies the alien and probably a commercial failure. At least Ripley's return could revive the franchise, and then the renewed success will incite other offshoots a la Mandalorian.
I also hope the dream part is not a recton, attempts to erase the past could prove divisive they should instead focus on moving forwards. The dream element is intriguing, Ripley 8 could use dreams to regain full consciousness of her past self (she couldn't remember things properly in Resurrection) and then you have old Ripley personality most people want, but with alien DNA, which could bring inner conflict and character development, and more plot opportunities. There's still some mileage left in the Ripley character, and retconning could take away from that.
And if people really want to see Hicks and Newt again they could bring them back in dreams, or maybe even physically using another sci-fi element, then they can at least give them some closure.