In favour of exploring the current ME universe. I'm uncertain about how this new character will have an impact on the in-game universe though. Shepard became the most recognised figure in the galaxy, the first human spectre, bane of the reapers, destroyer of geth, etc etc etc. I think a new character would either have to do things on a smaller scale, maybe they make a difference in the Attican Traverse but on a galactic scale, not really anyone important.
I think the troubles are going to lie with the new protagonist being another Alliance member. Shepard played such a massive role in human integration into the glactic community that it'd be impossible to ever achieve that kind of god-like renown. Interactions with familiar faces are going to have to be very careful to not be cheap and cheesy, with excellent storylines and reasons for being there.
Overall - I'm dreading some of the huge pitfalls that Bioware could fall in to *coughDA2cough*, but hopeful that they can pull another great game out of the hat.
I am more than fine with my hero in 4 not being in the same legendary sphere as Shepard, as long as it's not during the trilogies time frame.
I see it like like my Arcane Warrior Grey Warden who became king and then eventually disappeared with Morgan through the portal. That guy didn't just save Ferelden, but the whole damn place as if not for him, the world would burn while entering a dark age of darkspawn dominion.
DA2 I thought was good, sure I was no Grey Warden King that pulled humanity/elves/dwarves back from the brink of collapse, united the nation and fought back the all encompassing waves of darkspawn from wiping us out; but I was still a significant hero that accomplished a lot beyond the story of the legendary Grey Warden King. (I know, i repeated it because I feel so cool saying how bad ass he was, just like Shepard)
So I don't mind not being as amazing as the Legend before, especially since I played that Legend. But continuing the timeline and becoming a legend after would still feel like a great accomplishment moving forward.
Though I am confident that BW will do a good job with it, as I enjoy a lot of the stuff they develop and haven't let me down yet.