If Tangled (2010) was starred by real actors and actresses, what would have been the problem?
Would the effect be different if Tangled was acted by real actors/actresses?
How do film-makers decide which story will be produced as an animated film?
Those Films Make Money
Tangled earned $559 million word wide from box office sales, not including merchandising profits. It cost $260 million to make. So doubling your investment isn't bad.
Red Riding Hood (2011) was a live action story based upon a fairy tale. It cost much less $42 million, but only did $89 million. That would be counted as a success, except to a major studio $47 million in profit wouldn't cover their laundry bill.
Animation is a stylized format that has a broader appeal then traditional film. So more people will watch it.
Animated films are just another form of storytelling, and I wouldn't say that executives or writers or anyone looks at a script that's been written and decides if they want to do it via live action with live actors, or animation of some kind. I believe that sort of thing is decided well in advance.
However, animation can allow for certain things that live action can find harder to achieve, such as suspension of disbelief.
A good example of this is the horse Maximus. His actions and mannerisms would have felt completely odd and out of place had they decided to go with live action. They would have needed a CG horse, which imposes some restrictions on how they can make the character move and act without seeming too unreal. However, with a fully animated and highly stylized film, they can make the horse do things that would seem really odd to see a real horse do: act as a pointing dog, express emotions with his face, just to name a few.
People are more willing to suspend their disbelief for animated films, especially ones that look more "cartoony", than they are for live action.