I don't see any reason why the Cherokee couldn't be redesigned to meet new standards.
It was. Maybe you've seen it, it's called a Jeep Liberty in North America and the Jeep Cherokee everywhere else on the planet.
Just being a smart-ass.
The reality is that the XJ is just too old. People expect different things from a vehicle than what the XJ can deliver. Putting aside the suspension setup, people expect larger vehicles nowadays,
much better interiors, higher equipment levels, more modern styling, etc., etc.
Anyone that wants an XJ to use as a Jeep has one. Anyone that would want one to use as a tall station wagon would buy something else that was more modern and better made.
I love my XJs and MJ but I'm realistic about what it is: just another crappy Chrysler product with very little thought about making it a vehicle that will last. Times change, pretty much everything designed and built in the 70s and 80s sucks - and that's not just vehicles.
For all the money I've spent on mine building it I could be driving a Lexus LX470 or a Gwagen with a mild liftand a set of 35s and not be wondering when the next thing is going to break, and have a much more capable vehicle at the same time (towing, cargo capacity) but that's water under the bridge now.