Melbourne and Victoria have plenty of stadiums with sizeable capacity. The loss of the MCG would be difficult to handle, particularly in relation to the finals season, but I suspect the MCC wouldn't mind, and a bit of creative fixturing could see stadiums like Whitten Oval, Coburg City, and Princes Park used efficiently, as well as some regional venues.
We have a very small chance of bidding successfully, despite being a city eminently capable of hosting an Olympics, and our best bet of hosting a games soon might be as the emergency backup for a failed hosting. I think it would be in Melbourne's interests to build that water course to ensure we're truly ready at the (relative) drop of the hat to host the games in a 6-month time-frame, instead of a 6 year time-frame - the only other cities that could do it would be London, Beijing and Sydney, and in all but London's case, probably at a lesser level.
Melbourne needs to be an assumed future host.
As we have done for the last decade, Melbourne should continue to host many and varied major events in Sport, to ensure our name is well known to all sports federations and that we are thought of fondly. Melbourne needs to become an assumed host, not just the best city for the distant future. We need the SFs, IOC, media and money to assume we'll have an Olympics, and that we're truly in the first rank of next hosts. Rather than actually bidding and getting shot down, we ought to spend a decade and change talking about how we are getting ready for the bid, and constantly including mentions of our future bid when talking about world championships in Gymnastics, or swimming, or even Archery; when we hold the Australian Open, Melbourne Cup, F1... the people of Melbourne and Australia need to assume we'll bid, and when we do, that we'll win. Hopefully we can convince the rest of the world of it too, and see Melbourne 2036/40.