I’m sure a stand alone episode would have been fun, but it probably would have been more work than it was worth to craft an entire episode that had nothing to do with the overarching plots that we’ve seen so far this season.
It would be akin to creating a show within the show, and probably would have led to the audience watching events that took place in a dream or hallucination sequence, and, really, at this point what’s the fun of that?
While it might be kind of nice to take a bit of a break from the intensity of the action that’s currently going down on Once Upon a Time, it’s good to know that the musical episode, which is expected to air sometime in the spring, will continue to drive the action of the show forward and actually help set up the finale.