Actually, I totally agree with you about the writing in KH. Some of (maybe even most of) my favorite KH moments are wordless, involving little to no dialogue, and simply allowing what's occurring visually to tell the story (in DDD, I love the moment when Ven's Heart comes to protect Sora as he's falling into darkness; I think it's gorgeously depicted and brings the story back to being about Sora's fate and Riku's decision). I think the problem is that Nomura feels compelled to explain things that need no explaining, or that are much more interesting when left open to interpretation. Exposition kills creative reasoning; it forces everything into a box of rules and limitations, and too many of those are littered throughout the KH-verse at this point. Rules about how Nobodies and Heartless are made, rules about how time travel works, rules about the Heart, about the various Keyblades, about the Realms and Xehanorts and Clones and Memories...a lot of it still works as good solid fantasy and magic, which were the building blocks of the first few games, but starting with KH2 (and increasingly with most games since) everything suddenly needed to be written into a framework under which much of it has steadily dulled into volumes of sci-fi-ish gibberish. It's like Nomura's afraid that if he doesn't have one character or another give an excessively wordy lecture to explain every new concept his fans will eat him alive. One of the things I love about the writing for games like KH1, CoM and 358/2 Days is that the games themselves were always about the characters and the stories they had to tell; they didn't spend time establishing every layer of every plot device-- what was revealed was left to the journals and the secret reports so that the players could piece the bits together themselves; and the concepts themselves were generally simplistic enough that he could reasonably do that. When the characters spoke to each other, by and large, it didn't feel like an unnatural attempt to clue the player in to what's happening. It was always about moving the characters forward toward their respective end-point, and making you care about what happened to them-- not just why it was happening, but the fact that it was happening at all.
As long as it's done through flashbacks (in the way a lot of people were expecting from DDD), I think I'd be OK with that. On the other hand, we pretty much know Xehanort's story: I'm not sure we need to be shown it, in the same way that the Keyblade War suffices as it stands, an aspect of a mythological history that we'll likely never see in-game but understand to have occurred in some form or another. The only reason it would be pertinent to give Young Xehanort a clearer story line would be to resolve what happened with Terra after the split in Terranort's Heart and Body. And even then, they could have used DDD for this, easily. And even then, they don't really have to show us the past: it's already a relevant interest to Sora et al as they search for TAV, so they're going to discover what happened with that at some point in the present. Ugh, unless the only way to save him involves time travel. Just kill me. Anyway, I know it could work as a way of resolving the main antagonist's story for good, but I honestly think it would be more effective to give him some kind of brief dying confessional: make it a character moment where he expresses how desperate for power he was and how he was drawn astray. Maybe he doesn't even have to see the error of his ways, but rather than simply checking it off the list of "things that need to be addressed in KH3," they could give it some emotional depth and let him (preferably Master Xehanort because ungh Leonard Nimoy would make me cry, guarantee it) be the one to tell us what happened to him (kind of like AtW's final monologue in KH2, which I thought was a very effective bit of writing).
It wasn't only that fans expected it (let's not kid ourselves; a good deal of the time, fans in any fandom have no idea what's best for them), it was that Nomura facilitated the hype with teasing, evasive answers as to his identity when the entire time he could have just saved everyone the disappointment and been like, "It's Xehanort's self from the past." or something to that effect. Instead he kept referring to this figure as a "mystery character" (he wasn't) and trying to cause players to speculate as to how and why he was in the game (turns out it was time travel SURPRISE and he was just there to...be there, and explain time travel). I guess the problem was that DDD lacked a "key reveal" in the way that every other portable game had to make it feel important (Days had the WHO'S THAT HOODED GIRL thing, BBS had the WHAT HAPPENS TO TAV AND HOW DO THEY FIT INTO ALL OF THIS thing, Coded had the...well Coded had fun gameplay) and DDD needed something living up to that expectation that they could market to the magazines and the gaming journals. Haha, that's it, my final thesis on this matter is that Young Xehanort is the consequence of the commercial prostitution of art! x'D