It wouldn't "diminish the product" if DVC were to take over a moderate resort and upgrade it to Deluxe level. It would be a little more problematical to take over a part of a hotel (e.g. turn Aruba in CBR into a DVC "wing") because you would have crossover between the DVC aspects (deluxe) and the regular hotel (moderate) aspects but if you have a hotel that is currently a moderate but has a great and unique theme to it, reworking an existing theme/idea/resort may be a better option than trying to come up with something new that doesn't have as much potential as what is already there.
DVC could (and I think it would be popular) take over the French Quarter part of Riverside and remodel it. It's a pretty resort, has "unique" transportation (water taxi to DTD) and has a fair amount of existing infrastructure that could be used "as is" instead of having to go to the expense of construction from new. The pool (with a little work) , check in, food court, bar area (Scat Cats is an over looked Disney gem IMHO when you get a good live musician/band there) ,gift store, games area and a full service restaurant area that is currently in mothballs (the former Bonfamilles ). French Quarter is also a hotel that has a high return visitor ratio, so a potential future client base for DVC. Granted the rooms would have to be completely remodeled. Producing rooms that are more in keeping with the Sq footage of DVC resorts, but I think this would be a very workable option should DVC ever find themselves in need of a resort to sell ( in the event the supertarget proves hugely popular and sells out much quicker than expected) that would have a quick turnaround time from conception to selling.
P.S. I wouldn't put too much faith in CM rumors, usually they know less than we do LOL.
