I actually find that to be a great idea for a game. All it needs is an interesting gameplay mechanic; perhaps something similar to Super Paper Mario where each level goes 3D at certain points. There might also have to be a change in plot, and the story would have to be simplified overall, yet unique. The only obstacles that Nintendo would probably face are adjusting Link's swordplay and equipment usage to a side-scrolling format, but after seeing what was done in Zelda II, I'm sure Nintendo can manage (in "2.5D").
Another thing to consider would be the canonicity of the title. I think it'd be better suited as a spin-off rather than a part of the main series to avoid an uproar from fans. This factor is especially crucial, as "Paper Zelda" would likely veer away from many of the [main] series' staple core mechanics. That being said, if it is anything like the Paper Mario series, then it would likely feature a variety of RPG elements such as turn-based combat, EXP points, and story-centric progression and pacing - a far cry from Zelda II.