If you take into consideration Yonge and Dundas streets, Dundas Sq (the street) and the space in front of the Eaton Centre, you get a very large area if the streets are closed to traffic.
What I think is more likely is that we'll see a show with double locations: Performances going on at both venues with broadcasting switching between them. Viewers at both locations would watch live performances and the video feed from the other location on big screens. I think it could work and give CityTV a whole new life with this expanded tradition and enforce its position as "Toronto's TV channel".
Regardless of what happens, I'm sure this new building will bring a new purpose to the square and ensure that it is programmed regularly.