I don't honestly think Cody going against his older brother Dustin would be a step back. You just have to open your minds and allow yourself to see the situation in which it could help both individuals.
Yes, Cody has been in the Main Event scene since joining Legacy, but has Cody ever won a single's match against anyone meaningful - that anyone remembers? Not likely. He's never beat Batista, Triple H, or John Cena to my knowledge and those are the main three individuals he's faced in single's matches since joining Orton. He's one half of the "road block" that constantly gets ran through, on the face's way to the top heel.
If you want both Cody & Dustin to gain something from this - you need to set it up similar to this:
Have Orton begin to believe Cody is thinking about leaving Legacy. Have Dustin (not Goldust) begin to talk to Cody more, and attempt to set him right. Let Cody get into situations that put him at a disadvantage, in which Dustin comes to his aid.. and Orton does not. That will make people believe Cody could leave Orton, to join up with his brother.
At this point, you're at a crossroads. Have Cody begin a program with Orton, joining Dustin. Cody and Orton would feud, then afterwards Cody can go on his own - or team up with Dustin. OR, deepen the relationship between Cody & Orton, by having Cody befriend his brother, only to turn on him and beat him to a bloody pulp.
So How could this help them? You ask? Easy.. either direction will base an actual storyline AROUND Cody Rhodes, not just one that involves him as a stooge who gets his ass handed to him in Main Event type matches. As for Dustin, it makes him relevant again. If he's going to be around, then you might as well get one more good use out of him, right? Otherwise what's the point of him being there.