This is a shame...I just really don't think it will have the same impact on the city locating it near OMSI as it would have been downtown. All of those office workers who won't be able to quickly grab a lunch there, or stop in for groceries before heading home, it's just too far out of the way for many people. Perhaps I'm being shortsighted, and once that area of town develops more, it will make perfect sense, but it seems like there is a long way to go for that.
I wouldn't mind if they took over a section of waterfront park (maybe even the spot directly to the east of the proposed site, under the bridge), or even O'Bryant Square (too small?), which doesn't really seem to get that much activity.
I've always been intrigued with little forgotten pieces of land, like in the image below (which is just south of Waterfront Park on Naito). According to portlandmaps.com, the top red box is owned by the city (seems like that could be an easy piece of land to devote to a better purpose), and I'm not sure who owns the lower red box. It seems like these pieces of land could be great areas for a public market. The pedestrian friendliness of the area is pretty bad, but it seems like that could be solved, and perhaps even used to create a stronger bond between the south end of downtown and the waterfront.
I did a quick writeup about this option here:
http://www.drempd.com/blog/A-Better-...-Public-Market