The Road Challenges (stripped of the un-fun Spade Challenges) would be the "Sandbox" tour (I called them Quick Tours), an improved RB2-style tour would be the "Sim" tour (I originally called it the Full Tour), and your suggestion would be the "Full" tour.
Improving the audience would make an "audience view" like Rocksmith make sense as an option. I don't want to look at my band members when they are dressed in default rags.
Failing out is a throwback to the days of DDR, so it should no longer be the default. Rocksmith does away with song failure (getting booted out of the song for doing badly enough in a section), instead having the bad score be punishment enough and (I think) keeping you from progressing in the game until you do well enough. For learning a real instrument, this makes a lot more sense. Call the fail mode "Hardcore Mode", and when Hardcore Mode is off, then a 2-star or worse (except for an unscored run) will result in booing at the end (and fan loss), and a 3-star will be quiet polite applause (and minimal fan gain).
If we must hide ranks on the leaderboard, we should collapse the top into "Top" / "100th %ile" (1st place) and "Top 1%" / "99th %ile", like my collapsed view I suggested earlier for the expanded leaderboard. No use showing the ranks of the top percent if everyone else gets the hidey-ho.