That's a big... maybe... I think his heart is still in the right place but an overwrought King Kong that had more special effects than money to make them all look good and the absolutely ghastly Hobbit trilogy... Well, the chances of Peter Jackson actually making a Wizard of Oz that was fresh and resembled the book without becoming a massive bloated mess, seem slim.
It would be interesting though. As GreenGob says, the novel does contain a lot of killing of "bad animals" - wolves and crows. It also has a giant spider that can't help but remind one of Shelob so there are a few scary or distasteful aspects. Also, aside from the all-a-dream business, the 1939 film is not a bad version of the novel, so a lot has already been done right and there would be a temptation to change that just to be different. The novel does have a rambling structure that the 1939 film successfully fixed while jettisoning things like a neat but pointless visit to a part of Oz populated by people and things all made of china. Tough to imagine getting it more right... And this is from someone who basically hates musicals and occasionally wishes the 1939 film was not a musical.
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