I dunno, I think trying to make the Mandarin into a superhero, even an antagonist superhero, would so fundamentally change the character that there would be no point in calling him the Mandarin anymore. His hunger for personal power is too integral to who he is.

Having the Mandarin as a villain could work if Tony teamed up with a Chinese superhero to defeat him, but I'm blanking on if there are any Chinese superheroes. Could they do a non-evil version of Radioactive Man? He's obscure enough that most moviegoers probably won't even know he was ever a villain.