I was in Quito on my way to the Galapagos 3 years ago and found some Arts & Crafts near the Hotel Colon where I stayed. Not certain if it is the same as in the 90's but there were some small independent stalls. I was only there on a weekend so I can't speak to what other days the stalls might be present.
As for the Theater, if you are talking about the building just at the entrance to the Historic district, when I was there it had become a restaurant (very good one) called The Theatre.
Hopefully someone can give you more current information.
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