One could probably leave him in as a rumored figure. That rather reminds me of some of the old sandal epics in which Jesus was never seen, but there were plenty of rumors.
Morthoron, I suspect I've seen some of your work -- very few fan writers even know of the existence of the Blue Wizards, and if they do, there is often little connection between them and any kind of Tolkienian reality. I agree that farce or parody is the only route to go, since I have a feeling that those discussing this project are either writers or readers of fanfic whose computers would slag if they attempted to write a "real" MS.
The idea of Legolas' siblings is so common in Suedom, it certainly deserves a nod -- as do siblings of Aragorn, descendants of the hobbits who went off on adventures and never returned, relatives of Gimli, the rejected or runaway daughter of Denethor... you get the idea. I can't imagine a "serious" Sue writer wanting to "abandon" their beloved characters -- since it's the love of a particular character (usually because of the actor who portrayed him) that gets a lot of their juices going (at least from what I've seen). But to go to the aid and rescue of their kith and kin (who can be imagined and portrayed in all manner of wonderfully gorgeous ways...!)... That I can see, since so many Sues are long-lost friends and relatives, anyway.