Reverse engineer a chip or go with a new one and start from scratch?
Assuming that you guys are halfway decent engineers then starting from scratch will be the better approach.  My reasoning for saying this is simple:  Since you have experience with the previous product, and you're decent engineers, and new chips have come out since the previous product was designed, then you can probably make a better product now rather than just repeating what has been done before.  Also, you can probably do it faster and cheaper than trying to reverse engineer a chip.

Reverse engineering a chip is not easy.  It can be done, but unless you have a lot of extra time and some very expensive equipment (hundreds of thousands to a million US dollars) then it usually isn't worth it.  This is doubly so if the new product does not have to be compatible with the old product (I.E., it doesn't adhere to some old protocol or something).  

It is difficult to give you a comparative analysis of how hard it would be since we don't have all the facts about the old product.  But let's assume that it's a simple toy with some buttons, a speaker, and some LED's.  Nothing else.  That's a fairly simple product.  Doing a new product from scratch might cost 1/10th of what reverse engineering the old chip would cost.   Most of that is labor, so in terms of time it might take 1/10th the time as well.  The fact that the new product would be better (newer chips, better software, etc.) is just a bonus for you and your customers.