From a BBC interview:
It's going to be a combination of the three [live-action, CGI, animatronic], and it's quite fascinating. We had a meeting with the animal trainer, the animatronics people and the computer effects people, and between them they've done every movie that's ever been done this way. And to just hear about the challenges of this movie... the big thing with this particular film, for me, is that the animals have to look really real. It's an intimate story, and people know what spiders, rats and pigs look like.
The movie will be filmed in Australia according to The Age.com.
Greendale, in rural Victoria, has been chosen by Paramount Pictures as the location for a major Hollywood movie - Charlotte's Web....For the picturesque community, about half way between Melbourne and Ballarat, it's going to mean jobs and a chance to sell its tourism assets to a vast market that would otherwise have been well beyond its reach.
And with orchards, deep gorges and forests to draw people in, Mr Cutler is hoping the film will prove a tourism bonanza for the area...."They decided on this one simply because of the picturesque lay of the land and the ideal situation for what they wanted to recreate."