That's not an expansion, that's a shrinkification.
I seriously doubt Disney would take out that many rides/attractions at DHS all at once, and they almost certainly aren't going to take HISTA/MuppetVision as these areas appeal to young kids and hence are sorely needed attractions, and there is a second Muppet Movie on the way. With the failure of Lone Ranger, one newspaper article said that Disney will stick to known franchises, such as Star Wars, Marvel, and Muppets.
Remember that brass in charge doesn't want to see DHS take an attendance hit, as it would mean less profit. You can't take away 1/3 of the park and expect guests to be OK with massively increased lines. Here's the recent historical pattern of new theme park developments at Disney:
1. Carsland built on a backstage area/parking lot.
2. NFL built on land that wasn't being used for much, Dumbo very quickly moved and back in operation in months.
3. Avatarland going on basically empty/unused space in Avatarland.
Three big questions in the way of a massive DHS project, which some suit will ask:
1. Have you considered how this massive project will impact DHS? Can afford to watch DHS's attendance slip for 3-5 years? (Keep in mind that the brass often change positions every 3-5 years, they don't want it on their resume that DHS's attendance bombed during their time at the helm).
2. What do we gain besides a $1 billion dollar price tag that it will take DHS a while to make it back to profitability at its current level?
3. Why are we taking out Osbourne Lights? The show is popular, profitable, and has helped DHS, and the whole resort, bring in more business during the holidays . . .