We sort of did this with Code Blue... we started out actually rewriting, keeping some scenes but adding new ones to them and taking out others. Then it got tedious, and we ended up just editing the rest to fit the changes we had made. I'm glad we did it because I think it did improve the story, but I would never do it again. It was such a chore to finish what we had started, and it delayed the actual story for years.
The only time I have ever rewritten a story myself was with my very first attempt at fanfic. I started a story and got pretty far on it, but never finished it and never dreamed of putting it online anywhere. I stopped when I had an idea for a new story, started that, finished it and got it hosted online and moved on to its sequels, and I never went back to that very first story. Then I lost it in a computer crash. But I had always liked the idea of it, so I went back to it a year or so later and started writing it again from scratch. That was "Years of Grace," which isn't on AC, but is posted on my site. It's not an amazing story, but it's okay, and I'm glad I did rewrite it and finish it. It turned out to be a lot different and a lot better than the original.