Downtown and it is still rumoured to be a multi-use facility. Hmm, the lands north of Stampede Park still look promising - throw in the field house that people have been fundraising for and trying to get built in Calgary plus have the Flames pay to have the existing bus barns moved to some vacant city owned land to the SW of the Crossroads Market and voila. Everything will fit, both a new stadium and arena placed there will be within easy walking distance to all LRT lines plus the SELRT will go right by this location.
Please note that this is someone else's marked up picture from these forums.