Reading your post, I do like your intentions for sure! That said, a lot of things are never quite as easy as they seem... I don't mean to discourage but there are some things that need to be taken into consideration... but hey! feel free to argue these cases OR use this info to better refine your suggestion
With that said, lets get started!
Regarding the translation, I would honestly rephrase that suggestion as the issue doesn't warrant a complete re-translation but rather a fix on what exists. I like the idea behind having the option between subs for the Japanese audio or English audio, its very similar to another Sega release; Judgement, though I believe some more thought needs to be put into it:
- This sort of suggestion is usually fine for single player experiences but can get confusing in shared experiences as you have player bases within the same game and server using two completely sets of terminology.
- How far should things go? Would this extend to weapon names? Would the controversially named "Slave"weapon name make a return? This goes back to the first point that it might just end up dividing the fanbase and confusing new players wondering why some players call their weapon "Slave" weapon and others call em "Raven" weapon.
- How accurate should these alternate subs / text be? This goes back to the second point but to go into detail... even the Fan Translation took their liberties in some areas due to potential controversy or limitations. For instance, Harukotan's two territories in the Japanese version are known as the "White" and "Black" territory with people from both sides respectively being "White People" and "Black People" (yes really...). Neither the Fan Translation or the Official Translation tried to go for accuracy with this one for obvious reasons, the Fan Translation making up "Shironia" and "Kuron" and the Official Translation makingup "Daybreak" and "Nightfall" as the respective replacements. A 100% accurate translation may (understandably so) not be in Sega's best interest as a result.
You probably know the reason why... but to those of you out there lurking by. When PSO2 launched it had a completely different weapon grinding system that was more akin to what Phantasy Star Universe had (from my understanding). This system was one not many players liked so Sega's solution was to introduce a new grinding system around EPISODE 4's release which would be usable with all weapons released following the release, known as "New Type Weapons", while all weapons released prior to EPISODE 4 (retroactively named "Old Types") would continue to use the old grinding system. This of course adds to the game's complexity.
Now... not gonna lie, PSO2 Global isn't exactly the most beginner friendly game, but it is from my understanding that some design choices behind PSO2 Global were made with the idea of streamlining content to a degree rather than throwing "everything" at the player and while many players will continue to use this as an example of how PSO2 Global doesn't have "All the Content" I see no issue with the decision made as it was done in an attempt to streamline the game for newer players (whom the Global version was designed for as opposed to those already playing the JP version).
Now... a compromise to the issue; some Old Type weapons were in fact converted to New Types during this 'streamline process'. I'd say the best way to achieve what you desire here is to simply "finish what they started" and have all the Old Type weapons converted to New Types. This is especially the case given that the distinction between Old Types and New Types might not matter much for NGS since there may be a new weapon grinding system altogether for progression in NGS.
I have nothing to say on this matter... as a general suggestion for people who have issues with the game's sexual content, its a good idea.
As an alternative to the censorship... that depends on what lead to the censorship in the first place. If the whole thing was just Sega's paranoia about what the playerbase might think... then yea there's a small chance. If the change was pushed by a bigger entity such as one of the Globally supported country's rating boards or say... Sony (Discussed this one before), then the suggestion doesn't solve their problem as these entities would rather the uncensored content not be available AT ALL.
Furthermore... given the way the PSO2 servers operate, simply making ONE client uncensored would not be the way to go given their interconnectivity and this is something the Sony theory plays a hand with... all versions of PSO2 which share servers have to be consistent with one another.