The fact that ED already exists in Cobra Engine is a good point not to switch to UE.
If FDEV had to start over again from scratch I would much prefer the game to be in UE for two simple reason:
1. Unreal Engine is well known by many developers so when FDEV hire a new guy he can start working immediately without spending time in training.
2. There are countless games built on this engine so it's far more tested and you can expect it's more realiable.
I think FD would have faced a Half-Life type conundrum if they had begun with Unreal as a base. Half-Life was based on the original Quake engine (that's 1, not 2) but after restarting work on the entire game again, the finished product was almost a complete rewrite. Elite has very specific engine requirements that haven't been demonstrated by any other game built in Unreal, for example one prominant feature is rendering environments on the scale of solar systems. Using regular precision variables to store position data for an environment that large leads to all sorts of strange artifacts. I once built a large scale terrain renderer as a portfolio project, and found that without any special rendering solution, terrain very far away from the origin would begin to render innacurately. Textures became fuzzy, and eventually the surface itself got corrupted. That's just a singular example, and when you take into account the sort of massive game Elite is, I think designing an engine from the ground up to be precisely what you need is the better approach.