1) The official announcement has not been made yet as to what will be done with AE, only that it will be closed for a full year for "complete redevelopment".
2) Leaders have hinted at, and will certainly announce soon, that an attraction involving Stitch will replace AE.
3) I think it's a safe bet that WDI is not going to simply "add Stitch to Alien Encounter." The entire attraction will be changed, and while it's not clear exactly what will happen, I'm sure that we have seen the last of XS Tech in the Magic Kingdom (I could be wrong, but the idea that the big alien is just going to be replaced with a stitch figure is a silly one that has only been assumed by various posters, not announced by anyone officially connected to TWDC.)
I have been a fan of AE since I first experienced it. I think alot of people simply didn't get it, much like the people who get off of the Haunted Mansion complaining "That wasn't scary, it was silly." AE is full of jokes and camp. One of the funniest lines in any Disney attraction has to be "Spinlock, I've been siezed!" "Something you ate, sir?" While it is intense, and many people find it frightening, those who say "I wasn't scared by AE, it almost made me want to laugh" are missing the point, because the point is to make you laugh.
Oh well.
The new attraction will hopefully appeal to a broader audience, and anyone who thinks that a family friendly attraction featuring stitch will be "just for kids" or that "there are only 2 lands in MK for adults," is also... imo... missing the point Big-Time.
Getting back to my original point, saying "Maybe adding Stitch will make Alien Encounter better" seems a bit like saying (pre-'94) "Maybe adding teleportation and aliens will make Mission to Mars better." or "Maybe adding Buzz Lightyear will make Dreamflight better." I think this is going to be different and unique.