Would it have had more dramatic potential, to have Khan, or rather the descendents of his augments, return in TNG after managing to put some kind of workable space flight together?
No, because you would not have had that personal connection between Kirk and Khan. It would have been infinitely less powerful.
I think it could've been quite interesting. The ending of "Space Seed" had a lot of potential -- what could this band of superhumans build in a hundred years, given a whole world of their own and nobody to hold them back? That was the whole meaning of the title -- a seed had been planted and there was no telling what might grow from it. There were all sorts of possibilities there that could've been followed up on in the TNG era. But TWOK totally squandered that potential. Whatever one thinks of TWOK, that's a lost opportunity.
to be TOTALLY FAIR, at that point, TNG hadnt come into its own, episodes like code of honor, , angel 1, etc, with badly written scripts, and cheesy special effects, predominated. So I can understand why at the time they may may have found it safter to give it a place in a Feature lengh movie I just mourn what could have been, Khan's descendents, ariising... Wait heres a question... What could the augments have done in between creating simplistic spaceships, equilivent to mercury and gemini, and and viable interstellar travel, since its going to be years and lot of focus on vengeance... If starfleet was competent, they'd have soemone Watching the planet, ready to interdict expansionsism, out side the seti alpha system violently. Since however, Starfleet, cant figure out that when someonegoing into a dangerous mission that could easily result in their capture, we Delete or at least freeze their access code...
I think you're misremembering the timing. The Wrath of Khan came out in June 1982. The Next Generation did not begin to be developed until October 1986 and didn't premiere until a year later. So it's not like it was a choice between one and the other. But would there have been any reason for vengeance? If we're assuming Khan's people survived into the 24th century and that the promise hinted at in "Space Seed" was fulfilled, then we're assuming Ceti Alpha VI never exploded, that they were able to build a civilization on Ceti Alpha V. They might still have seen themselves as potential galactic conquerors, the naturally superior rulers, but what's their motive for vengeance?
Vengeance on the federation as an ENTITY for banning genetic engineering, and for Marooning Khan and his people there? But yes it would be more conquest driven , less Vengeance driven, I think.
Khan vs. the Borg. You will still be assimilated. Resistance is futile. The Borg would have eaten the arrogant Augments for breakfast. The whole existence of Khan screams someone blinded by his emotion.
On the Khan part...no. There's no emotional connection between KNS and the TNG crew at all. Once KNS was revived ("Space Seed"), Kirk became his eternal opposite--an enemy/competitor for all time. Kirk's particular thought process / heroic determination to not bow down to anyone was the perfect answer to a person bred to think he was the ultimate human. That outright challenge made the Kirk/Khan conflict one of filmed sci-fi's best, with TWOK being the natural conclusion to Khan's story.
I wrote a fanfic many moons ago (mid-90's) that had a very similar setup to Trek 2009. Where the Enterprise-D and another starship were thrown back in time. The other ship arrives first and the Enterprise arrives sometime later to find that the timeline had been altered and Khan had won the Eugenics Wars. It had a Picard vs. Khan element though I never thought it really worked. I know I have the outline at least packed away in a box somewhere.
Khan had to come back and haunt Kirk in some manner. One thing I find that never made sense in TWOK: Chekov was never on screen but Khan knew him (which I can accept, after all there were 430-ish people onboard and we didn't see all of them), so Chekov would know where the Enterprise left him at. Surely when surveying planets for Genesis, he'd remember: Didn't we leave an evil super-human stranded on a planet in the Ceti Alpha system--and isn't it missing a planet?
Back in the day, I would've said yes. To see Khan or his descendants face off against Picard would've been awesome. However I don't think the personal connection would've been there. That being said, I wouldn't have minded seeing more augments (especially after what ENT did with them). Perhaps the augments might have fit better on DS9 after the Bashir and Jack Pack stories though.
As great a villain as Khan is, there's also a certain hamminess to the character that is more in line with 23rd century Trek villains. Khan just wouldn't fit in with the 24th century, well at least the TV shows from TNG Season 2 through the end of DS9. I'm not counting Voyager, or the TNG movies, which did indeed feature hammy villains such as Shinzon, and the movie Picard that suddenly got into fist fights while a cheesey countdown was going on, etc, etc... Though it's a nice to muse about how the TV Picard would have handled Khan and his followers.