It absolutely could still be an empty plot of land -- and that would probably be preferable.
Dino-Rama is well-executed for what it is (i.e. it successfully executes the intended theme) but it was never a good idea from the start. Its presence diminishes Animal Kingdom because it's so out of place with the rest of the park. While Play! Pavilion wouldn't really have that issue at EPCOT, especially considering you'd have to go inside the building to see anything, it would still be both eliminating a place to develop something actually worthwhile and siphoning funds that could be used to better effect elsewhere.
Of course there's the capacity argument, but considering Play! Pavilion wasn't even using the attraction space, it's not like it was going to have any significant effect on capacity either. I'll take the chance, even if it's a small one, of something better eventually opening there instead of having the space permanently committed to such a waste.
I understand why people feel otherwise, though, if only for capacity's sake. I just don't personally think that having something is automatically better than nothing when taking all factors into consideration.