As I understand it, the avatar Shape sliders work by changing the XYZ scaling values of the avatar's skeleton bones and collision volumes. Specifically, each slider changes a combination of multiple scaling values at once, across a limited range, as you move the slider between 0 and 100.
There's nothing inherently wrong with this. But as anyone who has played with the Poser tool in viewers like Alchemy and Black Dragon can tell you, the possibilities for customizing your physique are vast when you can edit the XYZ scaling values of each individual bone and volume (though of course, these edits are local and not visible to other users).
A handy comparison for those familiar with Skyrim is the RaceMenu mod. Skyrim's character creator has dozens of values which control the shape of faces, but these are hidden and the vanilla game only gives a small list of presets for controlling generalized facial features. The RaceMenu mod gives the player the ability to directly edit these hidden values, greatly increasing customizability.
Similarly I'd like to propose the ability for users to customize their avatar shape by manually editing the scale of individual skeleton bones and collision volumes, on each individual axis, across the full range of 0.0 to 2.0 scale, instead of using the generalized and limited sliders of the current Shape Editor. The option to do this would completely blow the lid off of avatar customization, allowing fine control of every aspect of your avatar and opening up infinite possibilities for much more diverse body shapes and sizes of all kinds.
Obviously this would be an alternative to the current shape editor, not a complete replacement for it. The regular shape sliders do a good job of keeping bodies within (mostly) proportional and sane ranges, and the last thing anyone wants is for newbies to get frustrated when they're making a horrible mutant abomination shape for fun and accidentally save over their default shape. The advanced editor should probably go under the Developer Menu as a toggle for "Shape Editor Unsafe Mode" or something like that, to prevent inexperienced users from accidentally messing up their shapes.
I assume that Shape items in the inventory only store the shape slider values and not the XYZ scale values of every individual bone, so it would probably take a lot of work to expand them and include all the necessary data. Beyond that however, I don't see any downsides. For the end user it's pure positive; infinitely more customization for those who want to dive into it, and no additional headache or complexity for those who don't. Creators aren't harmed either; rigged mesh body/clothing modelers won't need to do any extra work, as they're still creating for the same basic shape system as always. Mesh body creators should indeed benefit, as "unlocking" the shape system in this way makes every single rigged mesh body vastly more versatile and useful to their customers. Additionally, I'm sure most of us think buying nomod shapes is a little silly, but shape makers would have far more to work with when making their products, and would get a lot of business from users who want an aesthetically well-made "advanced shape" but aren't confident in using the advanced shape editor to do it themselves.
Sorry for the doozy of a post, but this is something I've had on my mind for a very long time and am very enthusiastic for. I've talked to several friends who feel the same way, and I figure it's time to get the idea out there. If anyone has any thoughts, additional benefits or downsides I didn't consider, or god forbid a technical explanation for why this is completely impossible in SL's engine, please share!