It's a challenging question, ABMedia1. Even with so many Sherman/Denison stations having moved-in to DFW, quite a few signals still reach the area, both from DFW and from southern Oklahoma. I think a/c music is gonna be a tough sell on AM. Unfortunately, most listeners no longer care whether the station comes from Sherman-Denison, Dallas or Southern Oklahoma, as long as it sounds good. Duplicating a format that's anywhere nearby isn't likely to work. (Fortunately I figured that out before I spent a lot of money to start an LPTV up there in the 90s.)
I'm originally from that area and I'd love to see more successful radio stations there. For AM, I think you're limited to talk or some kind of oldies. KSEO/750 seems to have a lot of 70's and 80's. KJIM/1500 already covers oldies with it's Nostalgia format, although when I've had the chance to listen, it seems like anything from 1945-2000 could pop up there.
Maybe you could really narrow it down to "Back to the 50's" or "Stuck in the 60's." Recently I listened to some of KLIF/1190's coverage of the JFK assassination, which included some of their music, news and commercials. Maybe that could provide some "inspiration" for a format. A song or two, quick break then back to the music, QUICK news/weather on the hour and half hour, even QUICKER breaking news when it happens.
I don't know enough about the sales end of things to be a good source for that, but if you keep costs low and keep the format and operation simple, you might be able to make it work.
(edit: You know, easy listening used to be so popular. I'd love to see a station offering it again, but again, I just don't know if there's enough of an audience.)
Start now making a list of all the things you find annoying about local radio and how you'd address them--then stick to it. As an example, if *I* were making such a list, I'd be very concerned about commercial load. (I think local radio has driven much of their available audience to satellite and Pandora with excessive commercial loads.) Of course, you have to make money, but can you get a bigger audience by having a smaller commercial load, and justify charging more per spot? Maybe that's just me.
If you really want to do this, don't let anyone talk you out of it. Be glad for their pessimism, because they'll help you troubleshoot problems before they arise! Good luck and keep me posted!