Okay, well, I have been giving a lot of thought to this whole thing, and I've deduced quite a lot. It's a doozy, haha.
1. Universal is definitely giving this place an expansion. It's obvious.
2. It will be years until we receive word on it, though. I suspect that after a new ride arises (hopefully there's enough cash to build a new one in each park), we might get more insight. It will have to be at least two years, this one included.
3. The expansion will be smaller, but it can also not even be an expansion. There are areas (most of it, actually) that are absolutely perfect, but there are others that aren't. I like to think I'm one of the biggest fans of this area (205 rides on FJ to date, hehe), so I have a big idea on how much space there is and isn't. It would be highly beneficial to Universal if they redid Dragon Challenge into what I think would be a much better design (I'll post my ideas on how it would work on that thread some other time) and add a new scene or two into Forbidden Journey as well as work on adding more fog (!) and music (!) to the entire ride to give it the supposedly necessary update for Deathly Hallows. It would obviously require time off for the rides (4 months for FJ and 6 months for DC), but in the end, they could come across as being new experiences.
4. I highly disregard the fact that we'd be taken into Gringotts, Diagon Alley, or the Ministry. Those places are far, far away from Hogwarts and Hogsmeade. Hundreds of miles. You could say that we could travel by portkey, floo powder, or apparition, but those three means of travel would not work if you're trying to transport people by walking. By definition, these three means of wizard travel are not able to be accomplished by muggles, save FJ, but in that case, we are in a controlled area under the guidance of an enchanted bench. We could not accomplish these by simply walking into a 'portal' of sorts, so these places, while they would be immensely cool to walk through, would not work, at least not for J.K. and any hardcore Harry Potter fan. You could give the argument that the floor order in FJ isn't acceptable, but the rooms are all within the same castle. That's at least somewhat acceptable to the Potter fans. Putting in a new area like those stated, wouldn't be.
5. To elaborate on FJ, the facade would be updated in a similar style to a mountain backdrop that blends in with some added trees to the right of the facade in order to cover the show building. What is there now is unacceptable. Same for the greenhouse section. Many, many more trees would be added to separate JP (another thing would be to move the arch closer to the welcome center) from the queue, as well as an elongated rock facade with some extra towers (for example, see Prisoner of Azkaban in the scene where Black remarks on the castles beauty; you can see what towers would be added in that scene). Also, the JP side would have theming to JP itself with the FJ showbuilding section that faces JP being themed lightly to a research centre perhaps. The forced perspective wouldn't necessarily be ruined if it's done correctly.
6. I have an idea for a new attraction that can be implemented as part of this expansion. If you look on Google Maps, you can see that the Sinbad/Arabian area is quite large. An option would be to rid most of it to make way for the new ride, and retheme what's left back to a Greek styled area with a sign for LC. The new attraction would be a Hogwarts Express tour. This would require that the entire Hogsmeade station area be rethemed to add a new shop, and make the entrance a bit farther back. The relatively small new showbuilding for this tour would allow everyone to see the Hogwarts Express up close and enter the cabins. The head of the train would be farther down and would help mark the Northern entrance, not to Hogsmeade, but to the Wizarding World, as well as the entrance to the new Hogsmeade station, which would actually allow you to board the train. You would enter through a reproduced section of what is the DC locker area, and get a 'ticket' to board. Then, you would go along the 'path' (this part would be inside, and there would be overhead theming to replicate a 'sky' that would mirror the weather and time of day outside through a system that reads current weather conditions) and enter the train itself and explore the cabins and buy some candy, some of which you would not be able to find in Honeydukes, from the trolley lady. To exit, you just exit through the other side and go down another path to a smaller door to the right of what would be the train head. Surrounding you heavily on these 'paths' would be tall and thick pine trees that limit your field of vision to not allow you to see past them. In this new entrance plaza, a path would then also lead you to Hogsmeade village. Also in the new plaza and also in the geneal area of the Southern entrance (the one that's currently there), there would be huge rocks on either side that are akin to 'gates' that each have a fiber optic display implemented wherein the floor would sparkle (like EPCOT at night) and then these sparkles would join together with matching music to form "The Wizarding World of Harry Potter" on the rocks themselves, making for a more formal entryway. In the remaining space (because the showbuilding wouldn't be that large), on the land which used to host Sinbad, a new Greek-mythology-inspired attraction would be placed, most likely a heavily themed flat ride. Poseidon's Fury would be converted into an indoor ride in order to 'reinvent' LC.
Those are my thoughts on which I've wasted multiple sheets of paper trying to deduce what the best options would be for this 'expansion'. I have loads of concept art for this, but I don't feel like uploading it all, haha. I hope you all give insight!