The second one is that, while they already have digital HD copies of the live-action footage that they made for the DVDs and Sci-Fi Channel reruns, they may not have it for any live-action shots that included special effects (from set extensions to CG aliens to PPG shots). Babylon 5 hasn't had the best luck with the archives (many of the original CG files were lost in storage only a few years after the show ended, and I believe rats got into the original film from "The Gathering"), and if those shots are unavailable, then the whole project would just be a waste of time, because you'd still be stuck with a massive quality loss in shots combining live action and visual effects even if anything that was pure live-action or pure CGI looked perfect.
That is my understanding. As far as I know the original footage that was combined with CGI, and also live action leading into and out of CGI shots is also missing. Although there are a few B5 experts around here who might know better.
How about using CGI models of the actors as with Jeff Bridges in Tron Legacy? Even more expensive, but hey, we're talking silly money anyway.
You'd practically have to have made the assets necessary to remake all of B5 as CG animation. You'd need pitch-perfect 3D models of the sets and the actors (adjusted episode by episode and shot by shot to match hair, makeup, wardrobe, and aging) to match any shot where a PPG was fired or someone looked out a window.
At that point, you're starting to get to the point where you're doing a shot-for-shot remake rather than an enhancement of the existing show to bring it up to spec.