Yea... there are plenty of physical set rides that don't require a massive amount of space. Its all in how you execute the ride. If you do it correctly, you can have a decently sized ride/attraction that isn't too short or take up a lot of space. Hell, look at Disney's dark rides in Fantasyland.
I'd rather not see one singular ride use up that much space when you can be creative with the amount of space available to include more than one or two rides, dining, restrooms, giftshops, etc.