I think they need to do both.  I think first Dana needs to close a deal with HBO or one of the major networks, and I think they need to revamp TUF.  Theres no point in just transplanting the same tired format to a new channel.  It's gotta showcase the best of UFC, and that's not watching fighters train and do pranks; it's the live fights.  Still like the March Madness-esque tournament idea a previous poster suggested.  Get right to the basics: more fights.

I'd like to see them parachute eight fighters into established camps - BJ in Hilo, Hendo and Team Quest, etc. - and document the training that they do.  Do this simultaneously with a Grand Prix style tournament.  That would make for, if I'm not mistaken, 7 fights.  Make them full, three round fights.  Get lots of time with the other guys in the camps, with the top dogs.  Feature their philosophy of fighting, their methods for training.  Show what guys go through when they train twice a day, 6 days a week.  Give the new guys a chance to actually get GOOD.  No more alcohol fueled stupidity, no more meatheads crammed into a house together.  Intersperse a "training" episode, with "fight" episodes, which could also feature a fight each with established/undercard-level fighters (likely taken from the other guys already at the camps, as a way of getting the camps to participate).  Really play up the differences in training and style, really get inside the heads of the fighters, build up some history around these people.  It would also provide the opportunity to feature multiple big name fighters, multiple mid-range guys who are also at the camps, and the noobs.  You wouldn't even have to disrupt anyone's regular training; imagine an episode where the new guy is in his coach's corner for a title defence or something, and hearing his reaction to being so close to that kind of action.  Anyway, just a thought.