I'll beat Lee and Martin and others
The Small World show building is steel - either a pre-engineered metal building or structural steel. A wood building of that size/shape would not hold up to hurricanes. Besides, look up through the long-time missing ceiling tiles and you can see the superstructure.
I've heard before that WDW's Small World was supposed to have the outdoor queue, similar to DLR, hence the lower-roofed building attached to the obvious original front wall of the show building. If they ever wanted to, they could tear down the queue building and go Disneyland with it....which I'd be all for.
But, I don't think the IASW building was designed to receive a second story, or any structure on top of it...based on what I've seen of the building. And building a ride on top of a ride would be extremely strange. Sight lines would be awful to maintain, because the mountain would have to be tiny AND that building sits right by the main tunnel entrance. Lots of masking would be required, or no track on that half of the ride.
As for room behind ISAW....there isn't a huge amount, given that the train runs through back there. It would end up being another Pirate vs Railroad scenario.