In the short term it probably won't affect the attendances. Those who support the Blues will not stop to watch the football. They may go to a few of Cardiff City's games however (even I may do and Im not really into football) because of the obvious draw of the premiership football.
In the long term it may have an effect. Its common knowledge that Wales have a problem with promoting the rugby in schools and I'd especially say this in Cardiff. Kids in the play ground are playing football and with a successful team in the premier league its only going to raise the profile of football. The game is in a few primary and high schools, but only aimed at the traditional areas of Cardiff - and even then I'd take a guess at declining numbers. Kids are going to be pestering mum to see chopra vs rooney. Not to mention with Cardiff City's extra revenue, the marketing budget is going to massively outweigh Cardiff Blues. So long-term, I suppose it is a threat.
In saying all of that, Cardiff Blues attendance (even with the stadium move) has actually risen on average in the past 3 years, averaging higher than all the Welsh regions (they have been giving away some freebies I agree though). Also, when the team is successful, e.g. semi final of the HC, we can pull in the big crowds. The rugby fan base is there. For me, Cardiff City's promotion means that the Marketing team has to direct resources into the correct places to access the rugby fans - and Im not sure they're good enough to do it. The fan base is there, its just being smart to tapping into it and continue the trend of raising attendances.
Lets look at Leicester aswell. Over the years they've had a relatively popular football team and the rugby team has continued to be an elite club in Europe, so it can work.
We simply don't have the money to develop the arms park and I think, in time, people will be fine with the idea. After all, Cardiff City do not play in the city centre and do just fine.