Since the game is aimed for children, Ursula doesn't die but instead gets turned into a sea polyp.
The title mentions it as a Story Studio where you can create your stories. It's actually an animated story book. Kids can make their own stories at the end of the story.
If one clicks on Eric before the kiss the girl segment while guessing Ariel's name, he guesses the names Alice, Belle, Esmeralda and Cinderella.