Sometimes saying "the game need a reset" is really, really the best option.
Here's a horror story from a while ago.
Was playing D&D (forget which version) and the DM made Monty Haul look stingy. A couple of us said things "Um, are you sure you want to give us that stuff" but the DM pointed out he was just keeping our characters equal with the others in the group. Then, as our awesome equipment solved problem after problem, he realised he had made a mistake. Our PCs were steered towards a side encounter (steered so heavily that he forgot to check his notes and contradicted the reasoning behind the encounter) into what he had designed as a Total Party Kill (TPK).
After three to four hour long combat, half the party was down but the more sensible members (which included everyone who could only hit the opposition on a natural 20 and had exhausted all spells and powers that might do damage) were able to flee with the bodies - taking them to the place that the DM had set up for free resurrections. That was when the DM revealed that it was supposed to be a TPK because he had lost control of the game - and the general response "Why didn't you say that when we sat down? We could have roll new PCs and not wasted the entire night in a pointless combat!".
There were many, many hard feelings over that. More for playing out a pointless session (since even the survivors were being retired) than the ill logic behind the ambush.
I've been part of other games that reset or folded, but that long, pointless combat still lingers in my memory.
In this case, ask yourself if the players will enjoy the alternative world you're making. And think about whether they will still be invested in their PCs.
You are talking about changing the numbers on their sheets - but what about their backgrounds and aspects? There's no way they would have the same histories growing up in such a different world, so you're looking at rewriting backgrounds, histories, aspects - in short, completely changing the characters. If you are changing the characters that drastically, it seems that it would make more sense to reboot.
If you think that the "everything changes" bit is a good idea, then talk it over with the players first. You don't want to be remembered as the guy who rewrote everyone's PCs and then made them play an unfun game.
Richard