MLG: Luna would certainly make sense. As I recall MLG is in a TPML based in the States, so I doubt we would see him. But then in the continuity, Show-Off could be based years and years after TPML, so it could literally be anyone. Grey might be out of jail, heck even Callisto could have evaded the authorities under her new alias.
Karin: I think Totodile's fitting well on the team. Initially, the Ch4 thing where Jake critiscised his colour was because I was going to make him albino or perhaps suffering some pigment disorder. I really wanted to look at how superficial contests were and how Milo understood Totodile's lack of control over his looks, but in the end it got changed to him being shiny since, really, isn't that the equivelant? We'll see different reactions to his colour.
Milo is definitely in hot water with this incriminating picture. Naturally Jake thinks he should get rid of it, but Milo has plans for it. I don't think the girls will resort to killing Milo, since any associating with it would be as damaging as the photo itself. I think they'll want the phone, but as we'll learn, Milo ain't giving it up.
Speaking of which, Goldenrod has a bit of a criminal underworld-sub storyline that fits in with what you're thinking of. That's VERY exciting. Bloodshed and all that. As for the TPML character....Chris is an interesting suggestion. Might he find solace in sleepy Johto? This person features promimently in the chapter they are in.
After Kingler's brief cameo in Ch5, I think we might see more of Milo's old team for the odd job. We do see some in flashbacks. I was also thinking about a brief break during part of the fic. There is a part coming up, not for a while yet but a point where a break for a few months might work quite well. I won't reveal too much but I feel it splits the fic into two distinct volumes. I'll see how I feel nearer the time.