Fairytales could work for sure, I'm just saying I would stay away from any that are represented at Disney. I think it would be viewed as a cheap shot and increase confusion and make them look like they are trying to imitate. Any advertising they would have would need to be near flawless otherwise you are going to have something like "Hey family, come check out new Fantasy World at Universal Studios and experience Snow White and the mob of Gimli's". There are definitely people that would not be able to distinguish between Disney and Uni.
Universal is definitely strong enough to hold their own ground.