The 6V53 engine of the M113 is 1960's technology, very heavy for its performance. The Volkswagen V10 diesel is an example of what can be accomplished with a clean sheet of paper in terms of power to weight, and given that this or comparable engines are in production for the civilian market, inexpensive by military standards ($10,000?). At least a thousand pounds forward saved for frontal reinforcement, as well as some additional useable space.
Improving the protection quite literally would require armour removal, in this case by milling the thickness of the relatively soft and thick aluminum of the hull in selected areas with CNC machinery. I have worked with such machinery in the recent past, and am quite familiar with what it can do (the key factor is the competence of the operator to ensure that it cuts the metal where required, since errors would be time consuming to correct, but the learning curve is low and it is more a question of the operator's personality and work habits). The installed and ready to go cost of this machinery is no more than $500,000, significantly less if moderately simpler and less powerful tooling is employed (cost-benefit analysis required, made easier by the thousands of companies operating such machinery).
Some sections would be easier to remove wholesale, the most obvious being the broad sections of the sides and front, removed in sections with cutting tools attached to the CNC machinery. There are likely to be some complicating details to removing some sections of plate, but none that would be insurmountable with proper prepartion and removal of the relevant items, just as would be done with some conversions to install length extension plugs to the vehicle.
The removed material would be remanufactured as an aluminum/aluminum oxide matrix composite, a material with twice the ballistic resistance of homogenous alloys of aluminum. If practical, the replacement panels would be manufactured on site, quite possibly within a few dozen feet of the CNC machinery in order to eliminate handling and shipping costs, which might also be used be used to cut the remanufactured material to shape if moulds for every replacement panel would not be cost effective. The replacement panels would be re-welded to the vehicle in process, either by manual methods or CNC aluminum welding machinery.
Small quantities of granular titanium and/or tungsten carbide would be incorporated into the outer layers of the aluminim matrix armour to enhance ballistic performance, as well as significantly further raise the energy required to initiate self-sustaining combustion of the new aluminum-aluminum oxide (the materials inside the vehicle actually cause the vehicle to burn in the same manner as steel vehicles, a re-evaluation of these materials should be the priority; the heat required to cause self-sustaining combustion is many times higher than that required to kill the occupants regardless). Titanium panels are already used in up-armoured versions of the M113, once again a remanufacturing process without a material cost. Lower hull sections of the M113 would not benefit significantly from remanufacturing, they would be reinforced with thin external titanium plate and a thick liner of fire-resistant Kevlar and Spectra fibres.
At 12 tons, the remanufactured vehicle would possess 50% greater internal space than the LAVIII at 16 tons, a 100% increase in weight efficiency at roughly a quarter of the cost of the latter. Lower silhouette and center of gravity, double the protection, more maneouvable, development potential if required, air portable by C-130 or CH-47, lower support costs. The development cost of the vehicle would not be high, since the separate elements of the new drivetrain, powertrain, and re-armouring can all be performed and thoroughly tested and evaluated independently. I would be concerned about the ability of the military and large companies to do this in a cost-effective manner, perhaps the only real problem area, but as a small to medium business exercise well within feasibility.
Although this conversion could be described in greater detail, hopefully this is sufficient to explain what was meant by my remarks.
