Interactive Google Map of this location
On the Magical Definition podcast with Nathan Rose, his guest claims that the "night kingdom" park will be built on top of the WDW land fill which is west of the Magic Kingdom. There was some discussions this morning about mainstream media reporting on the wild rumors about the park and they saw another mention about The Adventurer's Club being relocated and being the entrance for the park. Of course the main stream press saw the club mentioned and missed the moving part and reporting it as blogs saying that the new park will be near Pleasure Island. From the map below you can see there isn't room for a park near Pleasure Island.
Some have asked about the location in relation to the western way development. The below map should clear that up. The far left pushpin is the start of Western Way. The lowest pushpin is Animal Kingdom, and the top pushpin is the Magic Kingdom.