If it had written IM3, it would go like this: the basic plot is a loose adaptation of Enter The Mandarin by Joe Casey, which itself was an update of The Mandarin's 1st appearance.
To me, Iron Man, along with Batman, Green Arrow, and Daredevil, are characters that should always be predominantly serious and a bit darker than other heroes. This is an element of Stark that has been sorely absent in the films, replaced with lame humor and general audience pandering. This inherent seriousness is also why there has yet to be a really good Iron Man cartoon, as the material would have to be neutered.
I would make the film what the trailers promised, with a darker and edgier tone matching to comics, with far less one liners and jokes.
The story is that a Chinese terrorist named the Mandarin is literally attempting to overthrow the government of China, so S.H.I.E.L.D. sends Tony to assist a Chinese government agent in an attempt to take down Mandarin. The Mandarin (played by Chow Yun Fat) claims to be a descendant of Genghis Khan, explaining his sometimes feudal garb and obsession with restoring China to its pre communist values. When shown in flashbacks, Mandarin is seen in business attire resembling his current comics self. He isliterally the polar opposite of Tony; he is far quieter and more serious, and doesn't like to live in the limelight. Though the origins of his mysterious rings are......well, a mystery (for most of the film), he claims that they are magical in nature and given to him by ancient Chinese dragons (referencing their true nature). This "magic" vs tech serves as a far different foe for Tony, as he is overcome with a threat that harnesses a power even he can not scientifically explain.
It is revealed that Mandarin is a former Chinese aristocrat named Gene Khan, who lost his fortune and respect when he had once tried to attack China. Though the gvt never found him again, he was unofficially exiled from the country. Thus, he began a pilgrimage and found his rings in a mysterious craft, whose pilots are dead dragon like aliens. This bit is only briefly shown, and would try to keep the somewhat gritty tone as much as possible. He then begins to build an Chinese Liberation Army and makes Bin Laden esque videos.
There are appearances from other (busy) Avengers, with Thor telling Tony that the rings do not remind him of asgardiam tech of any sort. Cap appears in a rather poignant scene. The 1999 flashback would show the original butthole Tony partying with his friend Yip Liu, a Chinese immigrant who is also the polar opposite of Tony. Unlike Tony, Yip has settled down and has a wife and child, who he must leave to go and serve in the Chinese military on a mission in which he is killed and left to die by his fellow soldiers, who feel he is too Americanized. This makes Tony apprehensive of the Chinese, especially his new partner Lung Fei, who is proud to be a Chinese soldier. Cap gives Tony a heartfelt speech about being a soldier for one's country, and so Tony eventually befriends Fei.
The intro is a playful fight between Tony and War Machine, who bear witness to the first terrorist attack of the Mandarin. Once he realizes that Stark is being sent to stop him, Mandarin sends the assassin Wong Chu to kill Tony and Pepper in their hotel room. After almost losing Pepper, Tony has her put into S.H.I.E.L.D. custody while he and Fei go flying to searching for the Mandarin. After hearing of Wong Chu's death, the Mandarin sends his next minion: Crimson Dynamo, who young Minion of the Mandarin in a red a Iron Man-esque armor. Dynamo heavily damages War Machine, but Tony lasts long enough to defeat him. Knowing that he must face Stark himself, Mandarin appears in a feudal armor, easily overcoming Tony with his rings as well as his martial arts prowess and strength, which is lifted to superhuman levels due to the rings' power. Tony and Rhodey barely escape, with the War Machine armor destroyed beyond repair and Rhodey badly hurt, possibly paralyzed.
Tony befriends Fei, and Tony builds his ultimate armor: the Silver Centurion! Tony and a S.H.I.E.L.D. team raid the Mandarin's compound, with the soldiers facing Mandarin's Terra Cotta-esque droids. Tony and Mandarin fight again, with Tony almost winning, until he is subdued by the Mandarin's electro magnetic device. He escapes soon enough to stop the Mandarin's penultimate terrorist attack on Shanghai; when he returns, however, he finds that Mandarin has escaped, and Fei has died in the conflict. Mourning his friend, but embracing the family that he still has, Tony looks towards tomorrow. In the last scene, Nick Fury reminds Tony that since Mandarin escaped, there wil surely be more conflicts and that the violence will just get worse. Tony simply replies by saying,"Than I'll stop hin somehow. I'll outsmart him, outbuild him, outgun him. Doesn't matter how evil the terrorist, would be world ruler or political despot, there's always an armor for the occasion. After all, I AM Iron Man."