They should do a full out draft. Meaning, yes, the entire promotion is wiped clean and drafts are done.
The first 10 or so rounds should be on Raw and the rest (jobbers) can be done on WWE.com for those who give a fuck. Otherwise you'd just see them on tv and realize where they ended up.
It should not guaruntee everyone getting picked, and shouldn't be limited in kayfabe to just active or contracted wrestlers. Meaning, you could debut or reintroduce somebody in a suprise draft pick in kayfabe.
For instance, picture RVD returning as a draft pick, or anyone.
Champions should be the only people guarunteed to stay put, giving extra meaning to holding a belt in the weeks leading up to the draft.