I think that is a good idea.
Failing that, I can only think of two theatres where I could see a balcony scene working, taking into consideration public safety, managing traffic in and around Times Square: (1) the Vivian Beaumont, which is clearly away from traffic. I can imagine that, as part of the production costs, they could work something out to build a balcony outdoors or to use the loge mezzanine, in which case the crowd would need to be in the lobby of the theatre.
The Shubert. I cannot remember whether there is a balcony there that can be used or whether they would need to build one. Shubert Alley seems to me to be the best option for the crowd scene. There would clearly need to be extra security making sure that 44th St. traffic did not stop (noise?), but in the past Shubert Alley has managed to hold a lot of people who were watching events being held in the Alley.
I just can't see NYC allowing them to close NYC streets 8 times a week for a Broadway show number. It needs to be somewhere that traffic is not an issue or can be reasonably managed without causing major anxiety for many unsuspecting drivers in mid-town Manhattan. I can think of no other theatre that provides a Shubert Alley type of option. The London Palladium is in a narrow street which, although super close to Picadilly Circus, would not disrupt traffic the way virtually any Broadway theatre would do.