I don't think it's feasible to have a show there during HHN. Not only the issue with the queue, but that area of the park is so busy as it is. While you have the standing room area in front of the stage, people would just stop on the street to watch whatever is going on. When they had Jack's show by Mels, they had ropes set up all night that would restrict where you could walk and stuff and had people manning the entrances, having a bunch of ropes set up and ops people in the main thorofare where all the Sound Stage houses and two scare zones are would just be a nightmare. If you tried to enter the park during a show, you'd pretty much be forced to go down Hollywood and trek to your first house in Kidzone or cut along the water to get to like the 4th or 5th SS house.
The stage they had for Jack was a great location as it's so wide open with a lot of lines of sight to see what's going on, but with the lagoon show, that's pretty much a no go.