My guess would be the 40" height requirement for Stitch is related to the shoulder restraints in this attraction. While it is not a ride, there is a rather larger plastic shoulder harness that lowers down over guests as part of the experience.
When my DS (who is afraid of NOTHING, lol) was five years old, he ABSOLUTELY freaked out during this attraction. Totally scarred him for a number of years....matter of fact, when we were there a few months back, he agreed for the first time to go back on it (he is almost 11 now!).