The location is what presents a key opportunity to create a much needed tourist attraction in downtown Huntsville. A dinner theater would provide jobs, support local farmers, and enhance on-going tourism and arts programs already working in Huntsville. With a bit of collaboration, a dinner theater right downtown could bring more people to the Ghost Walks, Art on the Square, Etc., (as they could make a full night of diverse program narratives) and it could showcase the important historical themes of Huntsville in an entertaining and memorable way, which could fit nicely with a visit to the Space & Rocket Center.
More fun things to do in a thriving downtown area means more tourism, and more dollars brought in to the city. This would not compete with other established restaurants as much as draw attention to them bringing people to the area that would not have otherwise come downtown. The current theatrical establishments in Huntsville should be invited (maybe as consultants or contractors) to be a part of establishing this new venue.
Alexandria, VA has a very successful dinner theater downtown that does medieval shows and serves an authentic medieval meal made with locally produced foods. As a tourist looking for something to do on weekend trips to other cities, I have also attended murder mystery dinner theaters and historic/comedic dinner theaters. Durango, Colorado also used their dinner theater space to stage community building events such as the Durango Follies, involving prominent local business leaders presenting a series of skits. I have tagged a few websites as examples.