the b&B theater was built to look like a very small version of an outside ampatheater. And the backstage area is very small. enclosing the theater would just be impractical. And the show has gone through changes. i think the current version is the thrid version. The whole story telling with the fabric was added in the new version. and the wolves use to be bats.
The Hollywood Bowl is, I believe, is the theater it is designed to resemble.
I can't tell you how much more I liked the show this year compared to when I first saw it in 1996. Back then, the songs were moved around (it started with "Be Our Guest"), there was way too much of an attempt at trying to impress people with unnecessary dance scenes (the bat scene alone was perhaps the worst stage show scene Disney has ever done), and the transformation was beyond hokey. Now, the story follows the movie, the songs are where they should be, there are no silly bats dancing around, and the transformation...well, okay, the transformation scene still isn't all it could be. I've always wondered why they didn't adopt the Disneyland stage show's version of the transformation where Beast was actually lifted up off the stage, cocooned in his cloak, the cloak begins to twinkle, and when he is turned around, the Prince is human again. It was an amazing effect, and if it could be done back in 1993, surely it could be done even better now.
As to replacing it, no. Why must anything that is more than 5 years old need to be replaced? The theater still packs full of people at each show, and it still feels fresh to me (even more so because of the changes). I was just there in May and saw it, I just watched my video of it, and I know I'll be going to see it again in 26 days. In fact, of all the "shows" at the Disney Parks, the only one I'd currently replace is Lights, Motors, Action. It's the newest, yet for me the worst attraction ever put on by Disney. I disliked Tarzan Rocks! a great deal, and I wasn't too fond of the original Beauty and the Beast show (mentioned above), but LMA was strangely the dullest and most painful thing I saw the whole time I was there. All that supposed "action," and I wasn't the least bit interested. If any show needs a change, my vote would be for that one.
Of course, I enjoy Sounds Dangerous! and Stitch's Great Escape!, so most would probably not put much credence my opinion...and that's okay.