Unless there's another way to make nameplates appear to fit into the 3D game world, I don't think "Virtual" plates is worth resurrecting, if only because the name wouldn't fit anymore. One lesson I learned while writing this mod is that if the illusion is just a little off, it won't be convincing and worse, it can be confusing to look at. If it were just a couple plates jumping from 10yd to 20yd to 40yd size, I doubt anyone could be convinced.

LibRangeCheck would only work for a few UnitIDs (target, mouseover, etc.) like you suspected, so the overall effect in fights would be one or two nameplates growing and shrinking amongst a bunch of others. Most nameplate mods already use the size of plates to convey threat information though, so the two would step on each other's toes. Because of that, I think the nameplate mods themselves should be the ones to implement LibRangeCheck in ways that visually make sense for them.

It's unlikely that Blizzard accidentally broke _VirtualPlates. The patch specifically removed depth information from nameplates, yet not from anything else. Additionally, this is the second time Blizzard has tried to break _VirtualPlates. I worked around the first attempt, but this time there is no workaround.

The checkbox is gone, but I think you can still allow overlapping with this slash command:

That would still be possible, but Blizzard seems to be toying with adding a setting like that on the beta. They've removed it on the current beta, but I'm waiting to see if they put it back in. Hopefully we won't need a mod to scale nameplates down in Cata.

Come Cataclysm, _VirtualPlates won't work anymore, so version 3.3.5.3 will be the last release until then. Blizzard removed the ability of addons to read how far away nameplates are, so they can no longer be scaled.

You can keep using the mod until Cataclysm though; It's not broken yet!