details of F 16
F16XL which is completely different beast, IMO
I think F16XL is mainly a development platform, where you can program the flight control system to behave like XXXX where XXXX is a variable foreign aircraft.
Answer to how do we do XXXXX is of course EZ to type from armchair, but these days it is a bit different from how it used to be. Point is that everyone knows in general how an aircraft works. A flight dynamics model can be developed with several programmable derivatives and other values. If you take a gizmo that flies, and simply record the control inputs, and airplane responses (output), you can do System Identification and get those derivatives, at least as pieces. No, things are not linear so this is painful, but it can be reverse-engineered.
This is why the Americans with the vijiting desi team could program the F16XL with actuators meant for the EllCeeYay, and make it behave like an LCA. Then after POK-2 they kicked out the desi team and held the actuators to ransom, so that there was a long delay while building the actuators again, AFAIK (all I know is what I read in the usual quarters, and the rest is my speculation).
So in principle at least, one can take an HF-24 or Ajeet, study its responses, rip out some of the rods and linkages one by one and replace them with wires and servo motors and maybe optic fibers, and tie them all into the control system. Run the simulation on MS Flight Simulator, then graduate to more sophisticated versions, get the pilot-in-the-loop simulations etc. Before there is a single test flight, thousands of hours of armchair flight experience can be accumulated. Then, as vina says, why not replace aluminum skin panels with composite ones, replace other non-critical parts, then graduate to tougher parts. New engine.
I just find it depressing that these things don't seem to be culturally ingrained. The Top in India seem to be mainly interested in getting baksheesh to buy ever newer shiny phoren, while ignoring all the opportunities to make revolutionary progress at the grassroots level.