I say renovate the scope and leave it for midsized events. It has historical significance. Use the land where Military Circle currently sits to build a "Mid-town" section of the city including a new larger state of the art arena, upscale hotel, a business tower or two, and some type of urban housing (apartments, condos). The location is central between the three cities of Norfolk, Va Beach, and Chesapeake, and it provides great interstate access for the other surrounding metro cities. Run the light rail through connecting to the airport and you have something serious on your hands.
Norfolk could even see if Chesapeake, and Virginia beach would like to get in on the funding of the arena since it is central. It would help with pursuing a national team also.