Dunedin city councillor Paul Hudson raised the possibility on Tuesday of using the Regent as a smaller theatre.
The council voted to include $4.7 million in its annual plan to upgrade the theatre, subject to reports and further meetings.
Trust life member Carol Melville, whose name appeared on the trust's submission to the council last week, said yesterday the idea was something the trust had been looking at.
"It's just a different way of looking at the seats and the way we light the theatre," she said.
"There are lots of possibilities for giving the theatre a more flexible working environment", both in the way lighting was used on the stage and in the auditorium.
"There's a bit of work to still do on that; still some possibilities to explore."
But Mr Entwisle disagreed.
In his submission to the council last week, he argued the need for a new 800-seat theatre, suggesting His Majesty's Theatre, owned by Sonny Chin, could fill the need at a smaller outlay.
Asked to respond to the idea of the Regent being used for the purpose, he said using lighting or curtains would still leave performers and the audience in a large empty space.
"It doesn't work. I've already talked to theatre professionals about the idea. In Dunedin they sigh, outside Dunedin they laugh."
Mr Entwisle said Dunedin theatre operators were nervous of council money going to a new theatre, and the impact it might have on their funding, something he did understand.
He supported the council providing money for the Regent Theatre.
Mrs Melville said the trust was reasonably confident it could come up with the $1.7 million it had to provide for the upgrade, through fundraising initiatives such as this weekend's book sale.
Asked why the trust had not told the council earlier of its need for so much money, she said there were councillors on the trust, and the trust had been in contact with council staff.
