i think they should only do a game like this if they intend to start a completely new timeline, (Reboot the Series) and use this "Generations" idea as the last hurrah for the 26 years of Links. Unless they intended to do a reboot after this game, or even just end production of Zelda games (won't happen hopefully ever), I don't see this type of idea for a game being used.
But I think it can be done very well with the right ideas and people. It is beyond me how they could pull it off, but Nintendo can do anything ! =D