What I have heard, that it will not. There will be an MSE lite version that might eventually replace the LA. I don't know for sure if that will allow you to or not. Ask your Cisco AE unless someone here can help you with that.
The MSE supports all the capabilities and programmatic interfaces of the Location Appliance plus the ability to run other Cisco or third party developed applications. Think of it as the next generation Location Appliance and as such will replace it in time.
A solution will comprise of the Location Appliance or the MSE, the Location Appliance is not required in addition to the MSE.
Dependant upon the version and current licensing of your WCS that is the right upgrade. Best bet is to check the WCS Licensing and Upgrade guide which discusses the various options at: