Undertaker is not passing the big man torch to Festus. First of all, Festus isn't young either. Secondly, he's not that entertaining. Third, a new gimmick would be his third one in WWE. At some point people are going to notice. Suspension of disbelief is one thing, but sometimes the WWE is just stupid, so it's not out of the realm, but it would be bad.
I do like the idea of putting Jessie in legacy. He is talented, and could fill the X-Pac, slimy little guy, role very well. I like it more when Mark Madden said the same thing, but points to the guy who repeated it.
What I would do with them, is first of all, send Festus away for a couple of weeks, bring him back cured. When he tries to talk, he won't shut up because it's been so long for him. Jessie could get increasingly frustrated, and then turn on him as Festus' talking ahs cost them matches. He talks to Maria at ringside while Jessie gets killed, he talks to a fan while Jessie gets double teamed and beaten. And then boom, he catches a Van Terminator from Jessie. Jessie vs. Festus is interrupted by Randy Orton, on the wrong show, and Jessie leaves for Raw, joining legacy, leaving Festus alone. He has no idea how to act alone, and goes crazy, all over SD!, eventually falling under the control of Edge and Vickie. He does their dirty work for a while, turns on Edge, loses a title match and then does Kane jobs for the rest of his career.