The original Peggy wasn't really a major character so when Babs Windsor came in it was easy to accept her. I've managed to accept the new Tracy Barlow/Preston whatever, but only because she was a kid to me when she left originally.
I've never managed to accept the new Sam Mitchell though. I think this may be because nowadays Sam Mitchell the character is so different from olden days Sam Mitchell. The Sam played by Daniella Westbrook would not be strutting around the square throwing her weight around.
Re-casting isn't such a big issue for me, but then Eastenders has a problem by changing peoples characters anyway. Take Minty, when he arrived about a year ago he was a big hard man, not the same guy who's been on the screens this last week.
What I'm trying to say is bring back Michelle if you must, recast her if you must, but whatever you do write the character as she was when she left.