Adlav53,
Caselec, said that the 4/0 aluminum is only for 200-amp services. The 400-amp service will need 350 MCM aluminum. This will cause you to run bigger PVC conduit from the transformer.
The POCO architect should of realized that. Are you sure that he understands clearly that you are planning on upgrading from 200-amp service to 400-amp service?
You can put the remote 200-amp panel on the other side of the house or lot for that matter. It does not matter, just more 2/0 / 3 romex for you to buy.
[img]http://www.dale-electric.com/images/4%2D0%20ser%2D4wre%2Dal%2Ejpg[/img]
Tev