As for Raidou:
a) If it's just for DoA:LR, then there's no need for a narrative excuse, as they won't be doing anything new for the story. He'd be a purely gameplay character.
b) If they want to bring him back for DoA6, the obvious answer (since cloning would be super-lame at this point) would be that Donovan funds some eeeeevil research that opens up a portal to the demon realm or some such, which is where Raidou ended up because of all his evil karma. You'd even get a sick fire stage out of it and all. The game has tengu demons and ninja magic and all this sort of stuff, so it's not a huge stretch. I really like the idea of Ayane going on a mission into hell to defeat her sick father once and for all. With her red eyes she'd fit right in...
I hope it's not Raidou, but I certainly prefer him to Shiden, Tengu or Genra/Omega. I love what they did with Tengu's moveset. Nyotengu is just awesome.