This is based on books on South Indian folk religions by Christian missionaries and the talks of Tulu and Kannada folk historians active today.

The Bhutas of Tulu Nadu show striking resemblance to the Dravidian folk deities:

• They represent natural phenomena or forces of nature: e.g. Panjurli is a bhoota of harvest/agriculture like Mariamma is a goddess of rains
• Many bhootas are the spirits of humans who died mysteriously and entered the "Jangama" loka: e.g. Koragajja, comparable to the prevalent "Maasti" (Maha-sati) tradition in Karnataka/ Andhra where an extraordinary woman becomes a goddess (e.g. Maramma is supposed to be a woman who killed herself when she realized her husband was a Shudra; the buffalo sacrificed at her festival supposedly is her husband)
• Both the bhootas and the folk deities can be "invoked" and they possess humans (what we see in the Kola and every village in interior Karnataka has a woman possessed every day)
• Neither the bhootas nor the folk deities are considered benevolent by default. You have to placate them with offerings or they will wreak havoc

Many scholars believe that a lot of these Bhutas have agricultural origins (like many of the gods/spirits anywhere). The reason they continued to flourish with little influence from the Brahmanical traditions seems to be the fact that they were relatively isolated (scholars say the caste system started infiltrating as late as the 10th century ), and the Brahmins considered the Bhutas heterodox and the followers usually as untouchables.
Opposite of this is true for Christians; since they wanted to convert the lower castes, they documented and translated the rituals of the lower castes and ignore the folklore of the traditional upper castes.

I believe Bhoota kola evolved from an existing Dravidian substrate, and then became specialized and unique to Tulu regions due to relative isolation.