Something else occurred to me that supports that Old City Station was on earth: the movie was still being written, and possibly being filmed, before the new Spacedock concept was fully developed. According to the ST3 DVD commentary and behind the scene features, ILM was involved with developing the designs for Spacedock, Excelsior, Grissom and the Klingon Bird of Prey. This likely meant that Spacedock wasn't finalized until they were in post-production. The only two interior shots clearly established to be in Spacedock - the lounge that Grace Lee Whitney watches the Enterprise pull in and the control booth - were filmed at ILM during Post.
If they didn't know exactly what this new Spacedock would be yet, its likely that Bennett and Nimoy began blocking the story based on the scaffold like drydock established in TMP & TWOK -- a docking structure with limited habitable space, physically removed from the orbital office complex. Indeed, if one were to redo the effects in ST3 and replace the scenes with Spacedock with TMP style Drydocks, one for each ship, it wouldn't change the film at all.
The only part of the new Spacedock really needed for the story were the space doors Scotty had to open, creating tension during the escape sequence. If they stayed with the TMP style dock, this could have been achieved with some kind of enclosing gate or clamp that had to be released. Even the scene with possible Janice Rand could have been accomplished with an observation module on the side, like in the beginning of Generations.
The final realization of Spacedock is at odds with the premise that Excelsior was the only ship with potential to stop or pursue the Enterprise. We even see glimpses of other ships in Spacedock at the end of TVH. While there are ways to explain this, the idea that there are no other ships that could have picked up the chase after Excelsior was disabled fits much better in the more "sparse" depiction of Starfleet in TMP and TWOK (sparse in the sense that their resources are out there in space instead of buzzing around earth). Because of this, I think they wrote the scenes for Old City Station, Bar scene with McCoy, Lounge scene with Morrow, and the prison break scene to all be locations on Earth.
