In general it's best to do it at the same site. Mainly, because users are familiar with that location. Secondly, it will be easy to copy any special permissions from the original library in the case permission inheritance was removed for it.
For archives, your best solution depends on your business needs. If there will exist more than 10k 'active' documents, then you will need another approach.
If more than 10k 'active' documents are needed by your users, then you should divide the documents up logically to your needs and create separate libraries at the same level based on your division until you can be sure all active documents will be under the 10k limit.
For archiving your documents that would be able to migrate to newer versions of SharePoint, look into setting up Information Management Policies . In general, it's better to use SharePoints out of the box functionality rather than roll a homemade solution. It will save you time and money in the future.