Yeah that just isn't true, it's something I read a lot, especially on reddit about Bethesda's creation engine (based on gamebryo).

There are some cases where you need a clean break from legacy code (usually in APIs as backwards compatibility prevents wanted features - DX10 and WDDM1.0 is a good example of this) but game engines are not one of them as there's no real need to maintain backwards compatibility. For game engines if you have the source code you can remove and replace anything you like.

Now it might be the case that the source code is a massive mess of undocumented badly commented code - so starting fresh is less work overall. But that's generally only true for smaller projects, nothing as huge as an engine.

I mean they could have just hired 2-3 coders to spend a year or 2 going through that code and properly documenting it all so when they come to make a major revision with their full coding staff it's easier.

There is a reason Source Engine 2 still has code from Quake Engine (as does id tech 6 for that matter) - not much, but still enough that if you look at the sources you can see the fingerprints.