The engine being free (and open source) would be a definite goal for the engine, not least because it wouldn't be as customisable as Essentials is (e.g. being able to add extra settings into pokemon.txt) if the source wasn't accessible... although I would push for more flexibility and options than what Essentials has (e.g. being able to define any number of abilities for a species rather than just up to 2). I definitely approve of the free part of it.
I'm sure it would be possible to have a 2D/3D toggle, although I'm not sure if it's worth trying. The first thing is to decide how the 3D would work, and for the easy-to-use method I'm thinking about (where you just paint tiles on distorted terrain rather than actually import models) the 2D/3D toggle wouldn't really work.
I do like my "distort the ground then paint tiles on it" idea (which now that I think about it is much like H-Mode7), because it'd be simple to use, and only uses tiles and no models (making it easier to have custom graphics). It also means you could skip the ground distortion part of map-making and simply paint tiles onto the ground instead, thus resulting in 2D maps (the rendering of these maps can then be set to orthogonal bird's-eye rather than the 3D camera, which shouldn't be too difficult).
The ground distortion wouldn't just be changing the heights of a 2D landscape like H-Mode7, though. You can also add in additional polygons, such as ones at a 45 degree slope which you can paint tree tiles onto (thus they work like how DPPt trees do), and overhangs on rooftops, and snow layers. All level geometry would be grid-based for convenience. Perhaps defining a set of tiles as an object could be a thing if it was necessary.
The complexity of this 3D idea is spiralling way up as I think about it more and more, and try to figure out how to make it work with 2D as well (like 3D map-making is just 2D map-making but with a few more options, even if you couldn't easy toggle between one and the other). I do think geometry and tiles are the way to go, though, at least for the casual user. There could also be support for models for those who want to use them. Again, complexity :S
I'd actually like for this new engine to veer away from perfectly mimicking the official games, in favour of making it work better as a PC game. For example, mouse support, larger screen size (without making Pokémon sprites correspondingly larger, to give more room in battles, etc.), WASD+mouse controls option, things like that.