Oolacile was a kingdom that existed in Lordran, in the area now known as Darkroot Garden, about three or four centuries before the events of Dark Souls.
Oolacile's fall is mysterious and sinister: in times of peace in the kingdom, Oolacile's inhabitants were convinced by a dark serpent to dig up the grave of the Primeval Man. Then, something happened, and the Primeval Man was transformed into a beast that unleashed the Abyss. The Abyss, corrupted dark, destroyed Oolacile and transformed its inhabitants as well.
As Dusk, Princess of Oolacile, states, Oolacile was a land of sorceries, but the sorceries featured by Oolacile's Sorcerers were very different. She also states that the lost kingdom has been "reduced to ashes" long ago. This would explain why there's practically nothing left of the Township or the Sanctuary in the present.
The area is accessible in the DLC 'Artorias of the Abyss', where the Chosen Undead is dragged off to the past by Manus if specific requirements are met; traveling to the land of Oolacile can only be done after obtaining the Broken Pendant in the Duke's Archives. Approaching the area where Dusk is initially saved, with the Pendant in one's possession, will reveal a shadowy portal.