Level-wise, sure, EBEL would be really good. But why would they want to add a team 1500 km away. Latvian team isn't that big of a draw, it would basically be spending money for no real reason. They aren't enthusiastic about Slovak teams playing and this is so much worse.
Folding or playing in the Latvian league are the only sensible options. Belarus' Extraliga could happen as well but I don't really see a point in it. Being competitive there is too expensive and Latvian teams are pretty much as good as the ones in Extraliga's loser stage. It could maybe work as a stopgap if the idea would be to get back to the KHL at some point.
In any case, I'm fine with anything either way. Dinamo as it is now, which can't even afford decent Latvian players, is a joke.