Yeah, the idea that it’s impossible to restore the original versions is patently absurd. Movies where the negative no longer exists in any form have been restored to excellent levels of quality. There’s plenty of source material to use.
This. And there should be a decent chunk of the negative remaining that’s not faded. The badly faded sections are effects shots that were composited onto Color Reversal Intermediate (CRI) stock. It allowed for positive-to-positive printing to reduce generational grain, but was very unstable. This is why for '97, many (all?) of the effects shots were digitally recomposited from their individual elements. All shots without effects should be fine, aside from that one shot that got dissolved during a cleaning test.
There are several routes available to restore the faded sections. The individual elements can be digitally recomposited again at 4K, though purists wouldn’t like this as it removes the theatrical grain/alignment/patina. To restore the original look of the film, interpositives would be the next step. If they’re too worn from overuse, then it’s on to separation masters, which aren’t ideal because they add grain, but the result would still look better than a theatrical print. If the separation masters have differential shrinkage, this is correctable digitally (and even to a certain degree optically, as was done painstakingly with Spartacus in '91).
If it isn’t in completely unusable condition, it may even be possible to scan the faded CRI stock and add the colour back fron a different source. Restorations often use multiple sources/methods depending on condition, what is ideal for a shot, and how it looks next to other shots.
The separation masters are B&W film with finer grain than color stock so they would not add additional grain compared to other sources. From what Lucas said, not a single duplicate negative had been struck from those. So the sources for the original version of the film are the o-neg, the separation masters, the tech IB prints, the interpositives (the last one known to have been made was in 1985, the others are probably more worn and wouldn’t be as good). For composited shots, you could go back a generation but then you have to recomposite the shot. So there are lots of sources for Disney and Lucasfilm to do a proper restoration of the original version of the film that would meet or exceed the best sources for many older films.