I'm not talking about a quality issue here; I loved Diagon Alley when I went to Orlando a few years ago and I can only imagine the improvements they could make on a second go-around. However, from a business standpoint, I think investing in a totally new land makes more sense.
It's hard to believe, but WWoHP actually underperformed when it opened in Hollywood. It lead to a spike in attendance that we can still see today, but they were clearly anticipating a much larger turnout. They designed, commissioned, and installed about half a dozen machines to distribute Time Return Tickets for when the land became too full and I'm fairly certain they only ever used them once, for an hour, as a test. They invested a non-trivial amount of money in preparing for crowds that just never materialized.
Now, I'm sure that there are many factors that contributed to this poor turnout, but I can't help but think that a big part of it was that the land was not new, not by a long shot. The one in Orlando opened in 2010 and the one in Japan opened in 2014. By the time the third one opened in Hollywood, guests had been able to visit the Wizarding World for more than half a decade. DA opened in Orlando in 2014, so for USH to follow the same pattern (i.e. opening the Potter expansion four years after phase 1) they would need to open DA in 2020, which we know will not happen. After that, the gap just grows wider and wider.
I would much rather see something unique, that sets the park apart from Orlando, that makes it a nation-wide destination, rather than just a local or west-coast destination. USH will need to up their resort game to accommodate those guests, but that's the direction they should be heading anyway. Personally, I had the idea of a 1920's Wizarding New York themed land. They could do a drop tower ride à la Tower of Terror themed around MaCUSA. They could have the secret Wizarding speakeasy.