Perhaps this was mentioned somewhere, but I missed it. However, I read near daily updates from the west coast and am yet to understand how the theme of Little Mermaid will work there. How is this going to be part of the California theme that they have tried to pull off for 10 years. I understand it in Fantasyland...anything story related can go there. But I don't see how converting the theater makes this ride thematically appropriate.
You have to think of DCA's "lands" as being themed to "places we don't want you to visit while you're in California (and take your tourist dollars with you)". You have Hollywood, the Santa Monica Pier, the National Parks, Cannery Row and San Diego/Miramar. None of these lands are particularly well themed, but that's been one of the park's major issues since it was built (and presumably since it was designed). They are currently in the middle of adding one new land (focused on one single property, and vaguely modeled on in-land California - not really a tourist area - that I would argue will only acerbate the problem) and changing another to 1920s/30s Los Angeles (I don't really have an opinion either way on whether this is a good idea or not).
Regardless, the park lands are a mess and you're right, the Little Mermaid doesn't really fit other than to say "Cannery Row is on the water, Santa Monica Pier is on the water and the Little Mermaid takes place near water, so it's a perfect fit!!!!!!" It's not perfect theming (nobody is going to say "Oh, there's a Little Mermaid Ride, this is just like Santa Monica Pier") but frankly, Disney rarely achieves (what I would consider to be) "perfect" theming anymore. It would fit better, imo, if the park was called Pixar's California Adventure.
All of that said, the Cannery Row area is arguably the worst land in the history of Disney Parks, and this is exactly the type of ride DCA needs - extravagant omni-mover dark ride (it could use a couple of them), so I'm willing to cut them slack on the appropriateness of the theming just because they are finally making effort to give someone like myself an excuse to want to visit the park.