I think you'll end up breaking a lot of older MGE mods if you remove MGEpipe. Not that you shouldn't rework the function that interprets commands- that definitely is not in great shape. If you could set it up so the MWSE MGE commands don't use the pipe (I think they do right now, which seems silly) but leave the actual functionality of MGEpipe intact, you'd get most of the benefit of scrapping the pipe without breaking any mods. Set up a "lookup table" or something that translates piped commands to the real function, and then based on the function's signature accept and return the right variables from the pipe.
Incidentally, I had an idea about augmenting Morrowind's scripts with Lua bindings; it's probably beyond my current abilities, but I posted https://sourceforge.net/projects/morrgraphext/forums/forum/866295/topic/4028821 about it. It'd give a lot of benefits, I think, but it might not be worth it. What do you think?