I'm voting other. I've thought about this for a long time and have a few ideas. Long-ish post below.
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IMHO, Disneyland's Fantasyland should be dedicated to Walt era animated classics. The goal with the Fantasyland Theater is to replace it with a mirror of the "castle court" attractions that flank both sides of Sleeping Beauty's Castle. If you can imagine, this creates a direct through line from the castle, between the courtyard buildings, through the carousel and Dumbo, across the Storybook Land Canal Boats, then again into a new courtyard, all the way back to the Fantasyland Train Station. This is all represented by the yellow line above. If stretched through the park, would go from the Main Street Train Station, through the castle, providing a balancing line for Fantasyland, then all the way through to the Fantasyland Train Station.
To accomplish this, the Fantasyland Train Station would likely need to be shifted over to the area represented roughly in yellow above. Given the complete retheming of the surrounding area, this would also provide an opportunity to reclaim the station from Toontown, retheming it to a Victorian/Edwardian European train station.
This would also likely require a reworking of the Storybook Land Canal Boats, especially given the goal of creating better guest pathways (identified in red and blue above). As it exists, the Canal Boats act as a barrier and berm to the Fantasyland Theater. Put another way, as it exists now, there is a back to the attraction. Given its position, it would need to be reconfigured to benefit from a path and views from all around the attraction. To me, this could be best accomplished by removing the Casey Jr. Train ride (a sad loss, but hopefully made up elsewhere in the park), and expanding the Canal Boats into a figure-eight like path that passes under a center bridge. This provides waterways on each side, a path directly over and through and paths all around, all affording views of the attraction. It would also allow a reworking of the scenes within the attraction, removing non-Walt era films (The Little Mermaid, Aladdin, and Frozen) and replacing them with Walt-era films and shorts like The Old Mill, Night On Bald Mountain, Peter and the Wolf, The Brave Little Tailor, etc.
The mirroring aspect would also allow us to potentially add another flat ride for visual kinetics, to the center of this new courtyard (identified in green above). Perhaps this could be a version of the whip ride (like Mater) themed to the Pastoral Symphony in Fantasia, with miniature Pegai (multiple Pegasus) pulling chariots with a raucous Bachuus statue in the center.
The removal of the theater allows us the space for the two large buildings creating our new courtyard, outlined in purple above. In these, the mix of shops, dining, and attractions would greatly expand utilized capacity for the park.
On the right, moving from the center out, we would add a Mary Poppins dark-ride. This keeps the English attractions on the right/east side of Fantasyland (with Peter Pan, Mr. Toad, and Alice).
On the left, we would add a Cinderella Carriage dark ride and table service dining hall, rounding out all of the Walt-era fairytales being represented in the park.
With this, I've added guest pathways, lost two attractions (Casey Jr. and the Theater), but gained four for a net add of two attractions. Depending on the necessary layouts, another attraction in this new section could potentially be added, either as a dark ride on the Cinderella side or another flat ride in the courtyard.
Were I to really go crazy with that area, I'd design it to cover as many bases as possible with one ride per film (so no Casey Jr and Dumbo, no Alice and the Teacups - the more iconic of the two remains). Casey Jr. has been removed for the reworking of the Storybook Land Canal boats. I'd replace the Teacups with the Pooh's Hunny Pot spin, which would allow us to take The Many Adventures of Winnie the Pooh out of Critter Country and keeps the English fairytales all on the right/east side of Fantasyland.