But that's the point, it is a significant fraction of the cost of a new unit.
Even Norfolk Southern is just at the exploration stage with this, so I don't see how you can be so certain that it's not financially sensible. There's a heck of a lot there in common already with these and AC4400CW's. They wouldn't be considering it if there wasn't some sense there.
They may or may not find a similar conclusion as you've formed, but they're well setup for it if it's green-lit thanks to their extensive shop facilities that can undertake the work rather than paying a premium for a 3rd party facility to undertake the job.
Gone are the days of AC being much more expensive than DC, notice the lack of new DC locomotive orders post 2010? I'm guessing we're at the point where AC rebuilds of DC locomotives that are 10-15+ years old aren't as expensive as years past.
Seeking universal power is why many lines have switched over exclusively. And at least one dedicated DC buyer, BNSF, has switched to a different concept for what previously would've been DC orders. With the C4, they're able to enjoy the advantages of AC traction motors at a similar cost and at a performance level as equal or better to that of a ES44DC.
And you're ignoring industry trends. Everyone is scrambling to get as many Tier 3 orders in as they can due to the uncertainties around Tier 4 and beyond. What was too expensive in the past is now worth the cost compared to the cost of Tier 4
We saw a similar thing the last year or so before Tier 2. And there hasn't been that huge of a spike with orders and I'm sure new locomotive business will continue on normally.
I doubt this has much to do with avoiding Tier 4. Rather, this is more about Norfolk Southern being the latest convert to AC traction motors. This program, from my take, appears more about wringing the greatest amount of use out of a huge investment that has been made by Norfolk Southern in the late 1990's and early 2000's which is still young with a lot of miles left, now that they've realized the errors of their ways and realize just what the advantages AC brings to the table really are.
It makes sense to be exploring retrofitting a portion of this investment to a similar level of capability since there's nothing fundamentally wrong with these locomotives and NS wants to grow the size of their AC fleet and start righting that wrong.