The band themselves were pretty much told 4 hours before the official announcement. It was a very sad situation, conducted by a higher up that the band had never even seen before reading off a pre-written speech about them not being needed anymore.
They are not going to be relocated...they will all have to re-apply for jobs at Disney if they wish to go somewhere else (there ARE other entertainment offerings on property with openings currently). Whats being said here is true, that the truck storage area was the FINAL factor in this decision (toy story land), however they have been on the chopping block longer than many realize. It had run its course and wasn't drawing the crowds that typically make management happy. That would be the reason its not being simply "relocated".
Some of the band members are the nicest people you could ever meet, and although this is horrible..I have confidence they will all find a better gig at other places (just not with one another :x) .