Is it true they originally planned the show to be set in the 26th century? If so where can I find a source for this? What was the idea had it been set there?
It would probably be more helpful if you told us what your source was before you ask if we know of a source.
I remember a Klingon Academy PC game mod featuring a massive future Federation ship called the Phoenix class or something along those lines, and the readme claiming it was rumoured to be the design for the new series. I think it was used in a fan film.
I've never heard that one, although I imagine many fans expected something along those lines, following the pattern (at the time) that each series moved forward along the timeline and increased the tech level. I'm guessing without a primary source that this probably has an informal basis, media speculation at the time, etc.
The story I kept hearing here and on other Star Trek sites was that the last thing Berman & co. wanted to do was take Trek further than the 24th-Century.
In this interview, Berman mentions a certain UPN exec saying "instead of a prequel, why don't we make it be the 25th century!" and Berman replies "What does that mean, tighter spandex and smaller tricorders?" That was a paraphrase, and I'm sorry, I don't know the time marker of that comment. It's possibly within the first quarter to a third of the video.
The original plan was to spend the first season buillding the ship at Earth, and launching it in the season finale.