If you read above, after the upgrade, Oxford Road will be just 200 metres from Deansgate. 11 car Pendolino's are longer than that.
The platform ends would be about 200m apart but the actual interchange would be far longer, both stations are on viaducts and between them is a row of buildings, a skyscraper, a canal and two crossroads.
As Watcher Zero points out its not that straight forward. The platforms would be about 280m long and most services would use the east end of the station because thats where all facilities are. Assuming a western entrance is built it is still going to be several hundred metres walk from train to tram and Deansgate-Castlefield tram stop is accessed by a lift or stairs on the side of the viaduct. The roads are some of the busiest in Manchester too. It would replace an arrangement that is effectively one interchange station with one that would take 5-10 minutes depending on passengers mobility. The only arrangement that would be comparable would be a walkway from the western end of Oxford Road alongside the viaduct and across to Deansgate which would be very difficult due recent and planned developments. Simply closing the station and telling people to use Oxford Road will not happen, especially with 5 skyscrappers under construction close to Deansgate Station and several more with planning permission. It could be done but I bet the cost would make other capacity options better value.
Edit:
Build a sky bridge.
That is the solution but the route and cost would be expensive. Does @Joseph_Locke think its a viable option?