The reinvention of the San Jose Mercury News began with an undercover operation. More than 100 staffers fanned out to places like a nearby Starbucks, asking people what they thought of the paper, disclosing only that they worked for a local media company. Now they are cooking up plans for a smaller, radically different product. "The very top of the organization is saying, blow up the newsroom," says Chris O'Brien, a reporter immersed in the overhaul effort. Under one prototype, the paper would be cut back to three sections: Live, Play and Innovate. In a second blueprint, it would junk...