It would have a courtyard with a meet and greet, outside shop themed like one from the games, snack bar, interactive area with animatronic talking character and other interactive elements... The courtyard would be surrounded by outside portions of the ride, and the queue would be covered, but somewhat outside I think. Later, a kids jungle play area was to be added on the far right behind the meet and greet as well, so a pretty decent mini-land altogether.
I get your point about the theming. It will probably seem somewhat flat in the main Mushroom Kingdom area, especially since you're just inside a cube with walls on all sides. But jam-packing it all with interactive elements will be pretty neat at least, and there's going to be a lot of recognizable elements from decades of games, which will be great for super fans.