I feel as though Bionicle Gen 3 would be most successful if it had both elements, with my primary evidence being Knights Kingdom (the second version according to Wikipedia) which existed from 2004 to 2006.
The characters in this line were represented the best as contraction based builds with the articulation being less than the standard Inika builds. While they all were essentially clone sets they still had personality due to their color scheme and arrangement of certain parts, not to mention their distinctive prints. The system sets of this theme both included vehicles (ships, battering rams, etc.) and what I believe Bionicle lacked in both generations, an actual view of the landscape, with several castles, and buildings being released. And all the characters (with the exception of generic bag-guy knights for the first 2 years) were included in both divisions of system and contraction. The theme had around 5 books, a video game, and even a collectible card game and was, I believe, a great success. The only reason I believe it failed was due to the success of an even better theme - Bionicle!
Now a lot has changed since then; obviously the love of contraction has declined somewhat and some sacrifices, I believe, must be made to save the Bionicle franchise at one point or another. With the essential “failure” of Gen 2, the only way to restore the magic of our beloved theme would be to enter the massive world of system.
I think the main issue Bionicle had for both generations would be the use of giant specialized pieces, but nowadays Lego has gotten much better. I like the idea of the system sets from gen one, but I really really dislike the giant mask references that they slapped everywhere! It was crazy! I’m sure that if Lego just repeated the essential pattern that they did with Knights Kingdom, Bionicle would actually be a success. We would get both cool, articulated contraction figures and awesome playsets with neat looking buildings and such. And let’s be realistic, it doesn’t really matter if we get a few monster trucks or race cars - the concept of elemental vehicles might actually appeal to a wider audience!
I’m not saying that I like elemental vehicles (I would much prefer landscapes and buildings) but we shouldn’t just rule it out! Lego might give us awesome build-able Gen 3 rahi instead!
(Something that I actually plan to do on my version of Gen 3, here, which is a work in progress) shameless advertising, I know 