Storytelling amusement rides (as opposed to the pure thrills of an unthemed coaster, Tilt-A-Whirl, or drop tower) can have varied aims: to set a mood; to explore a location; to capture vignettes of character, place, and time; and sometimes to tell an actual story. For the purposes of this discussion, I'm going to talk about these experiences as works of Capital-A Art. (I understand some people need more explanation and context for that, but that's better-argued other places by other people. I'm interested in techniques here.) I'm also going to speak in absolute terms here, even though many effects are more incremental, and work only in tandem with other elements.
At their heart, these rides, like poetry or songs or film, try to bypass our rational conscious brain. Using sound, light, the architecture (façade is a French word, meaning "false front") and surrounding areas of a park, and even smells, this artform attempts to convince us to suspend our disbelief. Our conveyance certainly plays a big part in this process. (Rides have two basic types of conveyance: the visible and the invisible. Visible conveyance, here, means you're supposed to notice the vehicle: Peter Pan's pirate ship exists in the reality of the ride, like our hangglider in Soarin' or Spiderman's SCOOP. The invisible conveyance is supposed to be ignored once we're in, like the cars in the Fantasyland Snow White/Alice rides, the Doom Buggies in The Haunted Mansion, or classic old-school haunted houses. Both types, whether we're supposed to ignore them or not, still affect our experience.)
Different forms of transport feel different, ever since cars and electrical power became common experiences around the same time (relative to human history). I'm going to talk too much about the history of transportation here, in a rough order of development, but it's probably necessary to belabor my point.
When we walk, we control (as much as possible): speed, direction, our orientation relative to motion, even our eyeline height. When we walk, we are in control and our conscious mind feels that. We have agency.
An animal or boat can be steered to a point, but they both seem to have a mind of their own. A horse won't jump something too high, and without a powerful motor a boat is prey to the whims of many currents. And they're both dependent on navigable pathways. Chance takes a role, and human agency isn't complete.
A hot air balloon can be made to go up or down, and some rudders might help steer. Airships steer better, and actual planes can be steered really well. The winds and air currents can still affect us, but a human has a large measure of control, even if it's not us personally. We subconsciously feel the intent, and in art that feels like creative structure. (Soarin' Over California worked so well because it felt unstructured -- we suspend our disbelief, and fly on the air currents. Each discovery feels organic, and we just ignore the trappings of art, the cuts and score. Soarin' Around the World is too big a topic, and each scene is visibly working hard to be perfect, with no "mistakes" like the skiier falling to rebuild the illusion. SATW is too precious -- we happen to be there just when the whale splashes, so it feels like fake magic instead of a lucky accident.)
A railroad is structure incarnate: very limited pathways, decided years in advance, no diversions allowed. A human chose the available paths, and every second someone has picked which path, and the speed we move. An electrical bus-bar ride (like the old-school haunted houses or the Fantasyland dark rides) is like a train. You can choose which direction to look, but your path and speed are deliberately chosen. Our subconscious knows that, even as we consciously ignore that for the pleasure of art.
A boat ride still feels more organic to us. There's rarely a pilot: we're floating on a river, we feel, and whatever's around that next bend just happens to be there -- a person couldn't have built this clearly ten-thousand year-old river just to trick and delight us. Our speed and direction are just as controlled as they would be on a bus-bar, but our ancestral relationship to waterways helps us forget that.
Obviously, some themes are better attuned to boating: Pirates of the Caribbean, log flumes, The Jungle Cruise. But storytelling rides can sometimes fool us better, hide the structure, and increase our enjoyment of pretending to believe, in a boat. Some nonboat rides are better themed to boats, but it's much cheaper to build a bus-bar.
So why is it's a small world in a boat? It's not obvious thematically. The promotional materials made hay of "traveling the seven seas", even if we see The Eiffel Tower, The Taj Mahal, etc, which aren't exactly accessible by steamship. I think that one works better because it's so cartoony -- everything is deliberately fantastic, so perfect. The OG version from the 1964 New York World's Fair and Disneyland's transferred version funnel the boats through deliberately, obviously constructed blue concrete troughs. We're on water, and the floating feel constantly bounces us a little, just enough to nudge our subconscious into a more authentic mood.
The IASW rebuild at Walt Disney World changed very little. The important change is from blue troughs to a flooded reality. We're still on a predetermined track, but each room has water up to the edge of the show scenes, and that fools us even more. We feel like we're randomly floating, which makes the exact same scenes more surprising in their details. Isn't it amazing, we feel, that we happened upon this? (This essay was inspired by the Alton Towers IASW-alike ride from 1981, Around The World in 80 Days. That ride is on a boat, presumably only because Small World is on a boat. It doesn't particularly need to be a boat ride -- anything even remotely resembling ...80 Days makes more sense to me as a hot-air balloon ride.)
There are certainly pirate-themed rides, and Small-World knockoffs, that run electric cars through the scenes, but they don't feel the same. The jerky car movement makes it more difficult for us to deny the agency of the creators' decisions, so it doesn't seem like anything just *happens*. (At the risk of going too far afield in this discussion, I've also ridden a few hybrid types. During the rain scene in The Many Adventures of Winnie the Pooh, our hunnypot starts rocking, as if the room is flooded, which is a fun cartoony effect after we've bounced with Tigger earlier. Pigeon Forge boasts The Jurassic Jungle Boat Ride, which uses a boat on a mechanical track. The speed is always controlled by the (loud) mechanisms, not water flow. We're always aware that the boat isn't floating free, though the ride has different, and frankly bigger, problems being convincing. I haven't yet been to Singapore, to ride the other notable hybrid form of fully-controlled boat.)
Using a boat doesn't necessarily improve a ride, if the ride has other problems. But, if it can be fit into the theme, adding real water to the ride gives it a more natural tone, makes it more organic. Humans like to play, and we like to believe. Riding on water, instead of sparking metal, somehow makes that easier.