Augmented reality, the screen becomes an iphone clone and you move the 3ds around just like a phone to take pictures of the pokemon which are implemented in the area around you.

Also, there could be apps like a fake instagram or social media where you could manipulate the photos and add filters and other effects.

The game is based on getting as many likes on your photos you take. You also have characters and events you interact with, for example there is a girl/boy you like and you know their favorite pokemon. You then take a picture of that pokemon and tag them in it. They will react and you can implement reputations and story based events that can happen influenced by how they feel about it. There could be in game competitions.

They could also sell an addon (or it could come with the game) that turns your 3ds into a fake DSLR, improving your photo capabilities and much more. This could also be functional with an external camera that is better than the 3ds, not by a huge amount. There would also be a printer built into it so they can revive the gameboy printer and you can print the picture you take. Although I would fear that making something like this would cause it to be absolutely necessary to progress in the game, which I am not a fan of. Maybe if it was cheap enough it could work.

This modernizes the game and gives you a few gimmicks to work with.

Although I think Augmented Reality would be annoying, so you could just be in your friends car in-game as he drives around and you move the 3ds to control the viewfinder with optional button controls. This idea still uses the fake iphone UI and/or fake DSLR addon ideas. It's better than being in a mine cart rolling around and it presents a huge opportunity for story arcs and maybe even multiplayer...where each player is in a different seat of the car. One could even be driving. You could even be in an airplane and you point your 'viewfinder' out the airplane window and you see Ho-oh flying along side you.

This isn't just limited to being in motion. There could be a scene where you are on a hill top over looking Pallet town with a close friend and you pull your camera out to take a picture of the two of you...before you leave to go on a long trip with this being the last time you may see your super close friend. It would be a selfie and right when you snap it you catch a strange pokemon in the background spying on you. Of course this selfie would be the in game character you completely customized, not your own picture. I have completely abandoned augmented reality at this point.

There could be a lavender town section where you get attacked by ghost types and you have to use your flash to attack them, although I would make this part short and sweet. Of course cubone would be there and of course it would be a tear jerking moment.

I think they can also incorporate some life lessons on how much social media/internet anonymity leading to assholes and other current topics on how they can affect our lives these days. Perhaps using the pokemon as a victim in some situations to make it easier to bear but oddly relate to for younger members (maybe even older).

There's so much they can do whiles also utilizing all of the 'gimmicks' and tech that Nintendo has been focusing on.

I feel like this could really work with the Wii U, since the game pad would have a way better resolution and it could be used as an ipad clone that you use to take pictures in game. This way you have a fps view point that you control with buttons on your television and when taking pictures you can use the game pad as a viewfinder to aim around physically and take the picture. Again, this would not be augmented reality.

tl;dr: modernize the game by using the 3ds or wiiu controller to become a fake iphone or tablet pc in game that acts as such. You use the camera on the device in game to take a picture, so you would use the gyro and move the 3ds around acting as the viewfinder or screen. You also have apps for social networking to upload and manipulate pictures. Yes, I know it sounds stupid and could be over complicated but if they made it work they create and amazing and unique experience that can also inspire younger generations to view the internet as a real place...instead of uploading picture they think are not gonna be seen by the world or acting like an ass hole cloaked by anonymity.