I personally don't think she would work as Black Canary. What I would've personally done is that I would've made Laurel an original character and then I would've brought in the real Dinah/Black Canary later on in the series.
Just watched the 5th episode. Best episode so far and by far. This episode took a major step up in the right direction. Also, I don't know if anyone else noticed but Oliver didn't kill a single person on screen during the very last fight and even used trick arrows. Also keep in mind that the whole theme behind episode 4 was the theme of murder and had Ollie being criticized by several people (Diggle, Laurel, Det. Lance) for the fact that he kills people. So I think it is fair to assume that he has quit killing

. We also know from the description of episode 6 that was released a few weeks back that the next episode will be about Oliver being convinced by Diggle to expand his mission and help people that need him in general as opposed to just targeting the people on the list.
He is officially the Green Arrow that I love in my eyes now. He may not be exactly like the Green Arrow of the comics but I do think that now that he stopped killing people, is using trick arrows, and will bring justice wherever it is needed in his city as opposed to just focusing on the list, he has the same heart and intentions as the Green Arrow from the comics. So he is at least the Green Arrow of the comics in "spirit" IMO even if he doesn't have the jokey personality. All that is left now for him is to become more political and show his liberal side more. However, since he just got back and is currently in his rookie career as Green Arrow, I don't have a problem with it and I think it's ok for him to not fully be political yet, even by the end of season 1. Plus, they are starting to hint at his liberal persona. An example would be in the Deadshot episode where he wanted to open a nightclub in one of the worst neighborhoods of the city in order to rectify it. That sounds exactly like something Oliver Queen would do.
A big congrats to this show so far and especially on this episode. The show turned out far better than I expected it to be and definitely more intelligent than I expected it to be.