I think it's a great romhack.
There's plenty of areas to explore and I'm really happy about how open the town is.
My only real problem is the fact that the "floor is lava" level seems to act as the peach's castle interior replacement with a not so simple way to get back. I'm not really upset about the difficulty, far from it.
I just fail to see how it would make sense that the exit is as far away as it is, nor do I see it making any sense how that level is the level you spawn in when collecting a star or dying.
I think it would be better would be either having an exit a lot closer to the player's spawn point in the "floor is lava" level or having the player spawn somewhere else instead. Perhaps the city or that spaceship hub world.
Otherwise, I think this is a great romhack that has a lot of potential. Good job so far.