Yes, The Wizarding World of Harry Potter will open at Universal's Islands of Adventure in late 2009/early 2010. This will not be an entire theme park. It is a retheming of the Lost Continent Island within Islands of Adventure to Potter. Attractions are to include the Forbidden Forest, Hogwarts Castle, Hagrid's Hut, the Village of Hogsmeade, and a new state of the attraction built from the ground up. This is also thought to include a retheming of both The Flying Unicorn and Dueling Dragons roller coasters.
Many are saying "why don't they have Diagon Alley? it'd be much better than Hogsmeade." Think about placement. With Hogwarts Castle literally right down the road, it would make no sense to have Diagon Alley, as that is in London. Hogsmeade is near the castle, just like in the books.
Yes, I'm very excited for this project.