In October 2012, it was in the Animation Building. By October 2013, it had moved to the Streets of America, and now it has moved again.
If you use the term "Characterpalooza" no one will know what you're talking about. That's the term the Disney fan base uses. Some CMs may call it the "PM Set" and I think there's also another term for it (that Itinkso has used) as well.
Because it's unadvertised and supposed to be a suprise, the CMs who do know about it likely won't confirm it for you until you see characters walking out from backstage (and even then they might deny it!). The closest CM confirmation we've gotten is a wink and a statement that "Maybe some extra characters might be coming out soon." But that's about it. I wouldn't expect a food vendor to know about it unless they'd witnessed it happening.