From what I understand, the wireless protocol that's currently being used for location detection (eg. on rides) is quite short range. Of course they could move to a longer range protocol, but that's going to have power implications, likely meaning either a replaceable or rechargeable battery (with no reason to believe that the user would bother), and/or forced frequent replacement, probably at increased cost.
So while location tracking is hypothetically possible, they can't do it now, beyond limited location detection in specific areas while the battery lasts (rides) and the direct use of the band on park entry, FP touchpoints, or for payment. And of those, the only one that's reliable is the park entry. The rest could be use of the band by someone other than the owner.
That said, to the extent that Disney can track your movement at this time, it would be wise to assume they are doing exactly that.
So while location tracking is hypothetically possible, they can't do it now, beyond limited location detection in specific areas while the battery lasts (rides) and the direct use of the band on park entry, FP touchpoints, or for payment. And of those, the only one that's reliable is the park entry. The rest could be use of the band by someone other than the owner.
That said, to the extent that Disney can track your movement at this time, it would be wise to assume they are doing exactly that.