I've been to GE since when it was called Story Town. It's a pretty good to bring young kids to for a day's entertainment, not at all a park to go to for thrill rides.
If thrill rides are what you seek, there are enough parks within a 5-hour drive to go to -- not that I agree that they shouldn't modernize or that the residents should be able to prevent expansion. I've often wished to have a few big rides close to home. It will take a MAJOR expansion to make this park into a thrill ride park.
But I know the history of land problems in the area (residents took their fight to court to prevent ANY business from EVER building on the unimproved land on the north side of 254 across the street from Aviation Mall-Exit 19.) Residents there are fickle and conservative and they like the PERCEPTION of being a quiet little resort town (emphasis on the 'quiet' -- it's too close to Lake George).
A long-term settlement would be great, but I do not see GE becoming anything of a major draw for coaster enthusiasts, except maybe for those wanting to say they were able to ride the Comet. Even if SF wants to put money into it.
I also agree that it would be a shame for the characters to be commercialized and for the story town characters to be replaced. There are too few parks left (emphasis on PARKS) that provide the kind of entertainment for young children that don't involve some kind of commercialized focus. If SF was smart, they'd let the existing characters be, and expand in the back and on the side where there is ample room without disturbing the character of this park. There's more than enough room for them to put in enough bigger thrill rides & coasters. It doesn't take much space to add a major coaster. Ask Cedar Point!
As far as traffic goes, adding lanes, etc to Rte 9 will help, but they're close enough to 2 exits off I-87 such that additional traffic should not be a concern. I think that the locals just have a bug up their...
...but I'm just as happy to drive 5 hours to SFGA in New Jersey, 3 to SFNE or, better yet, 8 hours to Cedar Point to get my coaster fill.