The use of IT in the response would not be correct. Only the demonstrative pronoun that is correct.
When referring for the first time to a previously stated whole idea the speaker (or writer) must use a demonstrative pronoun, not a personal pronoun. The function of the demonstrative pronoun is to "summarize" or "encapsulate" the content of the idea.
When the idea has been supplied by someone other than the speaker, the appropriate pronoun to represent the idea is that, to mark the item as being distant from the speaker. Once the idea has been represented by that, however, the speaker may refer to it subsequently as it. For example:
1) A: How about taking the bus instead of driving to the lake tomorrow?
B: THAT sounds like a good idea. IT will let us enjoy the scenery much more than if we were driving.
2) A: I hear you and Laura are getting married next month. Congratulations!
B: Who told you THAT? IT'S not true--we're not even thinking about IT yet!
One exception: There is a currently popular saying, "Don't even think about it," which is often used as a retort to a suggestion that the speaker rejects totally. For example:
A: I'm going to ask Prof. X to review my exam and maybe give me a higher grade.
B: Don't even think about it! She's famous for never changing grades, no matter what, and she'll just consider you a troublemaker.
Otherwise, the demonstrative that must be used to refer to an idea expressed by someone other than the speaker.