Well, it doesn't have to be 2 and a
half hours.

Does it? Maybe that's standard now.
But that's effectively what they did for TDK, with the Joker (with Harvey Dent scenes, Rachel Dawes scenes, and the part where Bruce went to Hong Kong for reasons, in between).
I take back what I said about removing all of Jean-Paul's backstory, too. The Catholic extremist angle is actually pretty popular (cf. John Brown novels and films). I wouldn't do all the crazy super-science stuff, but the religious component is worth looking at. Given the Nolan films obsession with relevance, I sort of like the idea of replacing the Order of St. Dumas/Templar mythos with a
Protestant fundamentalist background. This could make for something maybe
all too relevant, and interesting.
I'd have to do some reading to determine if, say, a premillennial dispensationalist would name himself
Azrael, although my general impression is that it wouldn't be much of a stretch. It's like that show, Touched by an Angel... OF DEATH; and the Revelation of John has angels, and a Horseman of Death, who could be equated to Azrael. I'm also concerned that it would stray too far from the canonical Valley (although Azrael has the advantage of being not terribly beloved, if I'm not mistaken).
I don't really have a plot in mind, but it would probably involve Two-Face actually being the prime mover--hey, he's gotta be there anyway, let us use him.
Dent exacts a lawless and arbitrary justice on both the mob and the police, while Batman, Gordon, and Azrael all try to stop him, and eventually, because of the difference in their methods, are forced to try to stop each other. Set-piece action ensues, and Azrael is an excellent physical antagonist for Bruce. A lot of options for endings appear to me, but none are obviously better than the others... the best, thematically, would be to have Two-Face killing Azrael, and sparing Bruce, based on the toss of his silver dollar, reflecting the arbitrary abuse of power Azrael and maybe Batman himself both represent in the first place. On the minus side, this leaves a Knightfall sequel undoable, but would make a good cap to the Nolan trilogy.