Appreciate the honesty, not following much of the drama so I'm out of the loop on this. On your place I would've chosen to focus more on indies over phase or stars, but it's more of a personal choice if anything.
I noticed how in both options listed here you end up rewriting the story, so in my opinion it would be better to leave this game as just a jam project and start the new one fresh.
Not gonna lie I would've liked to see this game be left in a better place, maybe as a completed prologue, but I know its tough to polish old projects like that when other things are going on in life. I myself have spent many hours trying to improve my own game after the jam ended, but was never satisfied with my results and just ended up leaving it on the perpetual back burner. So can relate lol
I think the premise of a shonen-esque band of misfits meeting cool vtubers as living breathing medieval fantasy characters is a very cool idea and can be turned into something truly special. Sending you all the motivation beams to see this to the end and realize this concept!!