I've been looking back on stuff to do with Realms lately and noticing that a fair few people would want a remake or a sequel. I had seen that someone attempted one of sorts years ago using the Undying/Unreal Engine, but it has no updates since 2001! If there were to be a remake or sequel, what do you think would need to be done to make it live up to the standard set by the original?

Well, I've heard of a certain Thief 2 remake made in the Doom 3 engine, so even the modding community might be able to pull it off. Still, consider the sheer size of the game maps.

As for an official remake, I'd say keep all the sound effects, they're already perfect, just remaster them in a higher quality (they tried to save on CD space). The game would sure benefit from even the most basic lighting effect. It's a pity the graphics engine was so primitive back then. You can see the developers' attempts at creating shadows in the original RotH, for example in the outer halls of the palace in Raquia, and later in Sheol, but they didn't have any real possibilities.

Combat was definitely a weak point. There were basically two weapon types, the rest were only different in the power, recharge rate and bullet capacity. Also, the shotgun reloaded instantly and without the reloading animation.

All in all, I wouldn't change a whole lot, except to enhance the atmosphere of the mansion a bit more to make it look like in Amnesia: The Dark Descent, with more darkness, shadows and creepy monsters.

One of the issues with ROTH is that is not quite an FPS, although using a pre-built engine like the Unreal 3 or Doom 3 engines (or something more recent) would certainly help improve the combat elements, as well as the shadowing too. One thing I have been wondering about is how the voices and original videos would be sorted out, as given they couldn't necessarily be used now, given the age of them, though someone has suggested they must have higher defintion ones that they filmed with. What may have to happen with a remake is that new actors would possibly have to be used in order to help keep the production values consistent. As you said before, the SFX could just be remastered, but the videos would take a bit of doing.

Sadly, given the age of the game, the actors couldn't realistically reprise all their roles as the scenes were filmed a good 17-18 years ago if an official remake were to happen. I think the look and atmosphere of the game could certainly be enhanced relatively easily though.

I think that the fact that the monsters don't follow you through doors and the fact that the staff takes so long to recharge combine to leave you on the other side of a door to a monster, waiting for your staff to charge up far too often!
They should defiantly change about combat, also they'd need to implement proper mouse look but that's pretty obvious...

Just giving monsters the ability to walk through doorways and even open doors would be a massive improvement. Imagine hearing the doors creaking in the distance all the time and having the feeling that you are nowhere truly safe.

Subtle changes (like increased monster AI and more fluid control) are allways nice. Graphically I wouldn't change a thing, nor would I change the music/sounds. They got the atmosphere of this game down. Also I couldn't play this game without pixelated FMVs featuring Emma Powell, what a babe. Amazing voice artist too.

I would be more interested in a spiritual successor/remake than a true remake tbh, but it is still very interesting.
Some of the things I'd like to suggest:

Prettier graphics, ambient lights, shadows etc.
Better controls, although I found the controls to be pretty solid for a pre-Quake game.
Scarier enemies, maybe less frequent combat, but harder when it occurs.
I think this game would be scarier if it relied more on melee than ranged combat.
Some puzzles relied too much that I would find some hidden item.

Although a totally different storyline, this game reminded me of Call of Cthulhu: Dark Corners of the Earth, which I have played before this game and also to Alone in the Dark, but in some ways better cause not all levels were dark and gloomy, like the world with the garden for example.

When I was playing this game, I was reminded of Undying, and Call of Cthulhu both, and lesser extent the Alone in the Dark series (but they have a different feel being third-person).

But I think in Undying in particular, it also had you traveling through a mansion and into weird and beautiful alien realms in places ...and the evil wizard trying to gain more power.

Another game with similar atmosphere is Eternal Darkness: Sanity's Requiem.

I'm with Strijkbout on preferring a spiritual successor rather than a remake. My reason is if the same game would be updated with today's tech, it would likely lose a lot of the feeling of its predecessor. It might be the same game but it wouldn't feel the same.

Combat definitely needs adjusting (the monsters in the tower that just stood there while you punched them to death anyone?). I also felt the enemies (except for the ones in Sheol) moved too slowly to be dangerous. The fight with Belial was pretty cheesy too as he just stood in the same spot shooting at you.

The weapons like the shotgun and pistol were fine (also liked how there was no ammo for them later in the game) but in combat, there was no difference between the staff, aelf's dagger and the wand. I also had these 3 hot keyed. It was kinda lame seeing an enemy and then unloading each weapon into them and if they still didn't fall, just keep cycling between the 3.

But the atmosphere, the sounds were perfect, it was the setting and the story which really pulled me into this game. The graphics weren't stellar even at their time but once you were in the game, you just didn't care, it just felt right. Anyone else play both Daggerfall and Morrowind? Daggerfall, even with it's bugs and older graphics engine and randomization, felt alive and dynamic. Morrowind even with it's far superior graphics felt static and empty and ended up being a lot less satisfying than Daggerfall. The tiny towns with one shop each and NPCs standing around really annoyed me in Morrowind.

Back to ROTH, the combat was really the only thing which let this game down, and maybe the find the brains puzzle in Sheol.

I contemplated making a contemporary remake of the game at one point, contacted some of the old actors and went hunting for the intellectual property, but it seems that the rights have been lost in oblivion through a series of acquisitions. I can't confirm, but I believe that Atari UK owns the rights right now, but maybe aren't aware of it themselves (and they probably wouldn't care either).

My takeaway from this - and as some professionals have suggested to me - is that it'd be easier to either make a renegade remake without permission, or to make a spiritual clone of the game that reproduces as much of its content as possible.

I might get to work on doing something like that in the future, but it'd be a huge project to undertake, so it'll have to wait for a few years. :-)

In that case, they're sitting on a gold mine! A remake would be an enormous task and you'd have some large shoes to fill. But, as I said, the game itself doesn't need much changing, other than some modern graphic effects and more versatile programming. I'd definitely back something like that via crowdfunding.

Can't you ask Kiss Ltd., who recently published the game on Steam? They would've needed to get the permission to do that from somewhere, they should have all the answers about IP ownership that you need.
http://www.kiss-ltd.co.uk/

I don't think it needs a full-fledged remake, but a couple improvements would be nice.

-controls should be modernized: WASD + mouselook, with the cursor/crosshair tied to the center of the screen

-video quality should be improved: find the old live-action masters (before the compression) and re-render the cgi.

And a sequel would be awesome as well, though unlikely.