It can be done, and they would sell, but I think that its more work than most people realize.
The old modules were done to a totally different standard than what people are now used to. They were generally campier, less gritty, the standard of belief was lower, and more mere frameworks than ready to play modules. Alot of detail that we would now consider essential, just simply wasn't there. To me, looking back on them, the most impressive thing about them was their brevity. It took a heck of alot of skill to get anything resembling a story to fit into the limited space available for a module.
I converted I3 over for 3.0 edition play. Just the stat blocks for monsters and traps and notes on the DC's of skill checks ended up taking up more pages than the original module did in total. If I was actual going to rewrite the module entirely, and collect I3-I5 into a single book, the total length of the module could easily top 200 pages - not counting art.
And I3-I5 were revolutionary in thier detail and attention to story arcs at the time!
Now imagine converting even a sketchier set of modules like the G series 'Against the Giants' dungeon crawls into something. I seem to a recall a 2nd edition 'Against the Giants' campaign, that was much better written than the originals, but it also required something like two or three times the ammount of paper.
Some modules probably also aren't convertable in a way that maintains thier integrity. I never converted I4, but looking over it I saw that I was going to have big problems with balance and storyline. A 8th level character is just not what it used to be. My suspicion is that the only good solution is to weave I3-I5 together in a much less linear fashion than the originals, and add some new material to give PC's more to do before facing down the villian at the end of I4. The result would be recognizably 'Desert of Desolation', but would be a very different module than the original.
Can you really do Tomb of Horrors in 3rd edition without losing its 'thinking person's' feel, in a game that allows and requires various skill checks? If you make the skill checks low enough, then the character skill system will quickly replace player skill. If you make the skill checks too high, it becomes a module solvable only by characters powerful enough that they can also brute force thier way through the Tomb. To retain the integrity of the module requires therefore something other than a faithful translation, certainly well outside the sort of translation allowed by the conversion agreement, but at the same time requires you to absolutely respect the orginal work for the landmark peice of art that it is. If this was an official product, the legal issues would no longer be there, but the skill required to do it right would still be required.
What about the fact that most 1st edition modules assumed relatively low magic compared to 3rd edition?
What about the fact that high end monsters have become radically more dangerous, and indeed in general, PC's have a much harder time relying on a good AC and slogging through encounters than they did in 1st edition?
All of this raises the question of whether or not TSR's time and money is better spent on creating new products than reinventing old ones. They have already went through one cycle of updating old classic dungeons with the silver anniversay products.