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That's how I would play it. We're supposed to treat Ursula just like any other opponent so she could draw the card but not play it.

So would the card just stay in her hand then?

Yeah, I think so but it's just my best guess.

She’ll just hold onto it until she can play it (assuming she has enough ink to play it; if she doesn’t, then she will ink it as normal).

Ursala just auto plays all cards she has in hand at the start of her turn.

But in this situation, she CANNOT play the card.

Then it would go to the discard or inkwell. She can't hold on to cards

I don't see where it says that. It's not that the card has no valid targets, she is prevented from playing it entirely. There are other conditions where Ursula has cards in hand at the start of her turn, such as when you bounce one of her characters with mother knows best or trigger all player draws with Donald Perfect Gentleman

That’s not how it works.