I think the problem is that they need her to sound just like Sierra/Ariel, and possibly were having trouble synching the voice to the actress.
Also, i'm assuming that since they didn't use a puppet for Ursula, and actually have Sherie as most of the character, they couldn't exactly turn her into the giant version from the movie realistically. Proportions would get in the way. She would have a GIGANTIC body, and a tiny little Sherie head on top. It would look ridiculous.
If anyone has the recent DVD release of Disney's "The Little Mermaid", pop in the 2nd disc, and watch the deleted scenes. The alternate finale seems feasible to be used in the stage production.
No giant Ursula, no ship crashing into anybody... it could work.
"The nice thing about the rain is that it always stops... eventually."
- Eeyore