It actually wasn't as succesful smaller. They had the exact same things for years done in the small courtyard where you can currently meet Merida. But no one other than little ones cared. So, they gave it a cool queue, a preshow with the cool magic mirror effect, a second preshow with the wardrobe, and added a Lumiere animartonic. But the show itself is mostly unchanged from the smaller version.
That being said, I fully agree a flat ride would have been better use of that space. Maybe a dance in the ballroom done like Rollicking Roadsters. Or a Be Our Guest themed teacups ride. Or even a very small scale, classic feeling dark ride.