OK this is what I remember.
I think the actual spot was between Jungle Cruise and Pirates. If you go back stage there, you'll see that pirates is just a big blank square wall; the show building here would be up against that, on the other side of the berm (the other side of the RR). They did float balloons to test sightlines of the valcano, from what I understand. The idea being it would be cool to see it from Polly, not so cool to see it from Main st. etc.
My understanding of the ride was that it was supposed to start as a tradional roller coaster, but in the valcano the floor dropped out and it switched from a track beneath to an inverted coaster with no floor and the track above for the rest of the time. It is possible that the direction change in E:E uses some similar technology, but I'm not sure how much. How much ideas borrowed from others - the valcano at mysterious island in Tokyo, E:E, etc.
What happened to it is simple enough. Adventureland really needs a thrilling e-ticket. Animal Kingdom really needs a thrilling e-ticket a whole, whole lot more. Epcot does too. The MK was the highest attended theme park in the world last year, so if you are still pulling the people in put the investment where it is needed most.
And I think the OP has three things kind of blurred together with the placement of Fire Mt. by the HM, the fire and ice, and the ice queen. At the same time that the Fire Mt. plans were being worked on, another team worked on plans for Bald Mt. (villains mt.) for the spot where the 20K lagoon is. So the show building would have back up sort of near the show building for HM. The idea here, as I undersand it, was that there would be a log flume, with Mickey, sort of along the Fantasmic sort of storyline, you stumble on to a meeting of the villains and they give chase. The rumor was that this used "Cave" technology. In some ways, Mickey's Philharmagic is the ******* step-child of this idea.
I think tha fire and ice would be the original type of roller coaster planned for the beastly kingdom in DAK but that ended up in IOA.
That's just my understanding. I wouldn't say those ideas are "scrapped" either, but I wouldn't look for them anytime soon, either, but they are still around and in the long term kind of plan.