I kinda agree that it would be a shame to see the work they put into this engine to waste... It seems to me that they've now built their groundworks and just need to improve it further with updates/future installments but, i do see how a middleware engine would really benefit them. I feel like unreal engine 4 has better graphical fidelity and usability than unity, though unity is a fantastic engine and can be used to create some excellent titles! The main issue with that is the physics, as carmageddon has a very iconic physics/vehicle handling system.
Since making this post, one of my friends brought C:MD on xbox one which means i've finally had the opportunity to play it and i must say that despite having lower graphical settings than reincarnation, the game has made many many improvements. I believe that in Max Damage, while the environments still aren't great, they are a drastic improvement over the Reincarnation counterparts. I mentioned making improvements to the lighting before and it looks like they've gone and done just that! The world now has a nice glow to it which really makes it more visually appealing. Also, the addition of foliage on the environment is an excellent and welcome change, and i must say that while it isn't a substantial improvement, the explosion effects seem to have been altered slightly making them look a bit nicer. It's not really the best improvement ever, and it may just be my imagination, but it is nice.
Many other stuff however, haven't seen much improvement... The peds now have more variation and do more which is nice, and the sick sadist in me enjoys running down people on bikes and sitting in. . . other things... but they still seem like they dont belong.
I think what Trent suggested, about improving the shaders and such is really what this game needs to improve the visuals! Again, cars look great!