Something to keep in mind is that the Pixie Hallow concept as announced wasn't much more than a glorified meet and Greet/photo op. There wasn't a play area, or ride, or even a show included in those plans. So ultimately, you didn't lose much. And thematically, i don't know how much I really liked the idea either in that part of Fantasyland.
Unlike the current plan, Somehow I don't feel that PH would've been able to tie into the surrounding theming that well. It would've gone from the coast/LM, into a big overgrown foresty kind of vibe, into a circus. I also didn't like the idea that PH would've been located so far away from Peter Pan. At least if it was closer to the other side of FantasyLand (maybe say where the great stroller parking lot/Skyway building is located), it could've tied in by the combined story..... but where they were going to put it, it just felt out of place.
Sooooo... Put me into the camp that believes that PH, as planned, being removed is an improvement. In some Ways, EPCOT I think would be almost a better fit for now simply because there is a lot more greenspace and "nature feel" at that park then EPCOT. Considering Fairies are usually very in tune with their natural surroundings, It works. AK would also possibly be a good fit, and maybe PH would fit better off of Camp Minnie/Mickey there then in the FantasyLand surroundings.