I think the issue a lot of people forget when it comes to dream casting of Ursula, is that SHE IS A MIDDLE AGED 'WOMAN'. Most of the names mentioned are in their late 20s and early 30s. Ursula is canonically based on Broadway and the original script King Titon's younger sister. He is canonically 1000+ years old, but looks like a man in his 50s. Thus Ursula should be in a similar age range as whoever is cast as Triton. Thus a middle aged woman/drag queen would be what makes the most sense in the role. This doesn't even take into account that Pat Carroll was 62 when she first voiced Ursula.
Sherrie Rene Scott was 40 when she played Ursula on Broadway, and many criticized her casting as ageist and against type compared to Carroll. Although I will say I love Scott's interpretation of Poor Unfortunate Soul, through turning it into a show stopping power ballad, instead of Carroll's spoken through version.
Ursula should be played by a woman/man of a certain stature as she's a woman scored by society. She has been forced into exile for most of her life, whose only purpose in life for the past millennia is to made Faustian bargains with mermaids. Ursula is no Genie. Yes, shes a larger then life character, but it actually comes from something. Ursula's campiness comes from her pain. She is very much akin to Mama Rose, in terms of pedigree, and should be cast as such. Is Melissa McCarthy perfect casting? I honestly don't know, but the fact they seem to be thinking outside of the camp box, seems like a good sign for the film going forward. Of the men floating around, the only one I think could do the role justice is Titus Burgess, but I also think he is 10 years too young for the role. I wouldn't be surprised if he is brought back to for the role of Sebastian, considering his multiple Emmy Nominees for Kimmy Schmidt, and the lack of any real names being thrown out there for the role.