Well, the train runs near that and sort of walls off the waterfront so it's unlikely that they'll make a push to develop that specific chunk. That's also near where they want to put the bridge.
I agree that there needs to be a diff. jail site. Putting the jail right next to the bay is silly, IMO as the inmates would need to be moved en masse if there were even a minor hurricane. I think hiding Mobile Metro Jail somewhere in that mass of light industrial/warehouse buildings between Govt. & Airport just west of I-65 would be the most preferable, but that might be too far from court (though a much more central location for police & not far from their HQ). The problems that Metro had as a result of poor engineering/construction are also well-documented & def. don't need to be replicated in the next attempt.
Back to those run-down neighborhoods for a sec: I spent a little while looking at listings of the "fixer-upper" kind of houses in downtown & the southern half of midtown and there aren't that many that are legitimately worth fixing. A couple were being sold at the worth of the lot b/c the house was irreparable. Some were overpriced relative to the work needed. I did find a couple that were probably worth fixing.
http://www.mobilerealtor.com/search/residential.asp?page=1&orderby=list_price&orddir=ASC
That's a list (which you can sort price-wise from bottom-up or top-down).