If you look at the document I cited, the idea is that the land occupied by the athletics stadium would have significant potential for commercial development. However, it's part of the legacy of the Commonwealth Games and, IIRC, Sport England gave permission for it to be built using a surplus generated by the Games. It would only be knocked down if the person acquiring the site agreed to refund a replacement facility of at least comparable quality in the fairly near vicinity (the Beswick Hub having been spoken about previously as a possible site).
As somapop says, the Don Valley Stadium in Sheffield no longer exists so there actually isn't a decent athletics stadium between Birmingham and Gateshead. Whether there's any possibility, if they build a new athletics venue, of making it a bit bigger and hoping to attract more prominent events, I've no idea. City wouldn't fund that, but maybe City's money could be supplemented with cash form other sources.