According to a recent report from Fanbyte, Xenoblade Chronicles 3 is apparently in the final stages of development and could even be announced before the end of the year. A new entry isn't too surprising considering how successful Monolith Soft's RPG series has been both critically and commercially, and the new Future Connected epilogue for Xenoblade Chronicles: Definitive Edition clearly teases a future project. There were even rumors of a new Xenoblade in development this March.
It's not just the existence of a new game that has sent die-hard fans into a frenzy. According to that same report, Xenoblade Chronicles 3 (or whatever it ends up being called) will not only act as a direct sequel to Xenoblade Chronicles 2, taking place within the same world in the far future, but several characters from both that and the first game may return. So, assuming this info is accurate, the question on fans' minds is who exactly could come back.
Melia, Empress of the High Entia
One of the main party members in the first Xenoblade Chronicles, Melia appears to be the most obvious choice to come back for a sequel. This is mostly due to the fact her voice actress Jenna Coleman appeared to confirm that another Xenoblade game was in the works before the report broke. If Coleman was made aware of its existence, this likely means she is being brought back to reprise her role.
Melia's race, the High Entia, have much longer lifespans than that of humans (or Homs as they're known in the first game) and Nopon. Melia herself, despite looking like a 17 or 18-year-old girl, is in fact 88 during the events of the first game. This means she could feasibly still be alive in the distant future (her father lived long enough to reach 320 years old).
The only problem is the claim that the next game is set in the world of Xenoblade Chronicles 2. While the two games are intrinsically connected, they do take place in entirely separate universes. Perhaps some kind of event will see the two worlds merging, or portals/rifts will open up allowing people to cross between them. Such a rift may have been featured in Future Connected, where likes of Shulk and Fiora, as well as Elma from Xenoblade Chronicles X, were able to travel to Alrest as part of a DLC pack (although it's debatable whether any of that is canon).
Pyra and Mythra, the Aegises
In the world of Xenoblade Chronicles 2, people can become Drivers by bonding with Blades, immortal beings that are born from Core Crystals. When a Driver dies, the Blade returns to their crystal, meaning they can be awoken again by another. As Blades themselves, Pyra and Mythra could easily come back in a sequel. Since they're Aegises, they're capable of outliving their Driver, in this instance Rex, the main protagonist of XC2.
It also makes sense from a marketing standpoint. Both Pyra and Mythra are among the most popular characters in the series, even joining the roster of Super Smash Bros. Ultimate earlier this year. Their addition led to Xenoblade Chronicles 2 experiencing a surge in popularity and selling out in Japan, so their return could attract customers.
Their return could potentially clear up XC2's ambiguous ending as well. The game ended with Pyra and Mythra sacrificing themselves to save their friends, but they were reborn from their Core Crystal (and in their own individual bodies too). However, it wasn't apparent whether they retained their memories or not, something some fans may wish to see answered.
Nia and Dromarch, the Flesh Eater and her Loyal Butler
Much like Melia, Pyra, and Mythra, Nia could potentially live long enough to still be hanging around in the distant future. Like the Aegises, Nia is a Blade. However, she is also a Flesh Eater, a Blade that has either been infused with human cells or, in Nia's case, eaten human flesh. While Flesh Eaters can lose their immortality as a result, they still retain incredibly long lifespans. Other Flesh Eaters in the game were able to live for almost 500 years.
If Nia is able to live that long, it stands to reason that her own Blade, Dromarch, would still be by her side assuming his Core Crystal isn't damaged or broken (the only way a Blade can be killed). That said, should Nia be anything like the Flesh Eater Cole, she could end up aging significantly and lose a lot of her fighting prowess. Perhaps she could take a back seat and serve as a mentor or guide for the new cast of heroes.
Adam Howden: Voice of Shulk, Zanza, and the Architect
Even if he's a voice actor and not one specific character, Adam Howden is an important part of the Xenoblade Chronicles series, having voiced a character in every game, including Xenoblade Chronicles X (he was one of the voices players could pick for their custom character).
Aside from voicing both Shulk and Zanza, Xenoblade Chronicles' main protagonist and antagonist respectively, he returned for the sequel to voice Zanza's good half, the Architect - or Klaus, the scientist responsible for the creation of both games' universes. While it's unlikely for any of these characters to return in a sequel, there's nothing stopping Howden from returning to voice an entirely new character.
Although Monolith Soft could always surprise fans by bringing back one of these characters in some form or another. Perhaps in flashbacks or as DLC, much like how Shulk was added as an unlockable Blade in Xenoblade Chronicles 2's DLC. Or maybe the game will pull a Kingdom Hearts and reveal that Zanza and the Architect's deaths caused the original Klaus to be resurrected, much like Master Xehanort from the Square Enix/Disney RPG crossover. At this point, only time will tell.
Xenoblade Chronicles 3 is rumored to be in development for the Nintendo Switch.