That article on IGN had a pretty good outline of how this could work as multiple character-focused miniseries. I'm still of the opinion that they should make a sequel of it set in the modern-day times.
Y'know what? Screw that. They should just make it about the guy who owned the newspaper stand. His story needs to be told!
The only way I feel like they could make this work is if it's a sequel, have it set in 2010 or something but in the Watchmen-verse with a whole new generation of heroes, or if it's a prequel, make it a more character-centric miniseries. I would have to disagree that the characters are 'ripe with potential'. By the end of Watchmen, all the different characters are sort of finished being super heroes, and everything that happens before that is pretty well fleshed out. The only characters I can think of that aren't fully explored through either flashbacks or the supplementary material are some of the original Minutemen. I think a modern-day sequel would be the best way to handle this though. Then again, pretty much anything can be good so long as it's written well.