That's why I inserted 2 points. First it's Honorius who makes Ataulf magister militum, a common practise in 5th century Western Roman Empire and his nephew co-emperor (Caesar). With the power resting with the magister militum - and in the 5th century a magister militum could quite well decide who would become emperor, see Ricimer - Ataulf could have managed to have young Theodosius proclaimed Augustus, if he strikes a deal and accepts that someone from the opposition becomes co-emperor (Caesar).
Well, it could work, technically at least, but it's not resolving any point that made the WRE fall. The new caesr would be still limited by the land-owners (senators, bishops) interests, and as Sitilicho, would be likely murdered if he tried to impose his policy. In fact, his barbarian origin would likely legitimize a posteriori such attempt.