I don't know exactly why Imagination was screwed up SO badly. The reason for redoing it was something about making it into something that was easier to maintain. And they made an attempt to theme it to Honey i Shrunk the Audience. But failed miserably even in that endeavor.
As for what Walt would say, i personally think he would have been very ticked off at Epcot overall. I'm actually talking about the original plan, not just the messed up version. He very much wanted his "Progress City" project to go through. But as for the ride itself, he probably would have been able to appreciate the old one. I can't imagine him liking the new one, but i'd imagine he'd be able to see the brilliance of the old ride.
I'm glad they were able to create an original attraction that didn't need to be related to prior movies or characters. And that IS something Walt would probably have appreciated, the concept at least. Many of his rides weren't based directly on movies or characters from his past works. I fail to see why everything needs to be themed to an already existing idea. That's why the idea is so brilliant.
The only characters i could see possibly being able to replace Dreamfinder and Figment in the original theme of the 80's attraction are Merlin and Archimedes. Only because Merlin and Dreamfinder are so similar in style to me anyways. But again, i appreciate that they chose NOT to delve into recycled material and just go all out with something original. I'd even be open to the possibility of a movie based on the original attraction, it had potential.