I think we have to examine the importance of the CNE, and whether the land it sits on, including its buildings can be put to better use. The CNE has been in decline for a few years now, and frankly I'm not sure how many tourists it actually draws from outside of Toronto. To me it's essentially a large regional exhibition with a big name. Perhaps it's time to determine that the CNE grounds could be put to better year-round use and simply let the CNE go. (Personally, I think it should go from city to city and actually become a national exhibition. Whether that's realistic or not, who knows.)
I think if you look at the grand scheme of the waterfront, the CNE grounds could be the considered the western gate/jewel of the waterfront. You have some of the greatest buildings in the city on the grounds, and some excellent opportunities for photo ops which all tourists like.
First, The Princes Gate is mostly an ignored structure. For such a great structure, no tourist ever sees it unless they happen to be going to Ontario Place or Medieval times. It could and should be considered the official gate to the waterfront, and it should be more of a city square where tourists would flock to. Then you could put museums in the Horticulture Centre, the Liberty Grand, The Press Building, The Better Living Centre, the Automotive Building and the Direct Energy Centre (and probably others). There isn't a better building in the city architecturally than the Liberty Grand and it's unfortunate no one really knows about it. Also on the property are Medieval Times, Ontario Place, Ricoh Coliseum and BMO Field which all attract people and a couple monuments (Peace Shrine Memorial) that would be meeting places for people. Combine that with the view of the city you get, and you have a perfect tourist draw.
This would also fit well with the Transit City Plan and would maybe double the number of people using the Waterfront West line.