I don't think a sequel is the best course of action
yet to course correct. CDPR got some of their Witcher reputation from their free and paid DLC support lifecycle. Some people's favorite parts of the Witcher series showed up in DLC.
They've been almost entirely focused on quality of life improvements since launch (1.1 through 1.6), which has delayed some of their promised DLC, some of which implied would add some of the "missing" things that people complain were "cut". Based on what I saw of particularly Witcher 2's lifecycle, I think CDPR expected to deliver a lot more, faster, in DLC than they've managed so far. But also I'm sure they expected to need a lot less quality of life improvement on the base game than they've needed to prioritize since launch.
I think that a big part of needing so much quality of life improvements and bug fixes was CDPR using a game engine that wasn't ready for this kind of game. A sequel is an excuse to switch game engines (CDPR has already announced that they expect future games to be Unreal and that after some of these issues their Red Engine, which they've been using since Witcher 1 may be dead and Cyberpunk 2077 the last game on it), and CDPR would risk repeating all the same quality of life problems in an engine switch. Even with an off the shelf engine like Unreal, there's a new learning curve and a lot of code (and some of the assets) won't directly transfer and a lot of starting from scratch.
I think CDPR has a chance with two or three DLC launches to fulfill a lot more of the game's potential. I would hope they swing through those promises to deliver strong DLC and give us something interesting.