My idea is to add the possibility to change the settings of a game in the middle of a match.
It's already possible now, but it makes the replay laggy.
And make it possible to have planned settings change in mods too.

Uses ? Scenarised games and mods. Imagine a sparring, where dismember is turned off. You could change this if you get the opportunity to make an epic decap at the end. Or maybe for survival mods with a gamemaster changing settings ? Or it would add the possibility to have a "sudden death", by reducing the dojo size until someone dqs. And you could end a replay faster if someone has to leave.
This is just a few ideas of how to use this simple change, there's probably a lot more you could do with it.

I was just about to submit this exact suggestion , it's perfect , and would do a world of good for the current ingame community . Replay making via spar/parkour could be taken to the next level , by way of having better finishers/fatalities , as opposed to the current K.O shots that the majority of us tend to strive for.

Also it'd be sexy as hell in upcoming videos.

Not really, it can be done with replay hacking. Tyzi hacked in a decap at the end of the spar with tyzi and muun.

This idea could get really sketchy with duels.

Except duel mode already desactivates fentering someone, so it could simply desactivate live setting editing aswell.
And you can't hack replays while in MP. It's only appliable to "finisher" moves.