If the Engineer was to be updated, I think only his weapons should be replaced:
The Shotgun replacement definitely needs to do something with using the Engineer's metal supply as ammo, maybe more damage since the Engineer's metal supply is important for buildings as well. I think it would make a nice addition since it allows the Engineer to better ward off enemies while not overpowering him.
The Pistol could be replaced with a beacon device of some sort where when it hits a target, the Engineer who threw it on them's sentry turns and only shoots at that target. It could be lobbed like Jarate and be useful for getting sentries to attack disguised spies, or not shooting at the unkillable ubered folk. It could "wear-off" after five-ten seconds or so, and the downside is the loss of an accurate weapon.
The Wrench replacement, as suggested by others, should encourage teamwork between Engineers. It could do something along the lines of repairing your own buildings at only 60% of the original rate (15 metal), but repairing other Engineers' buildings at 140% of the original rate (35 metal). Of course, to balance it a tad more, it'd probably do like 25% less damage to enemies as well.