For starters, you have some really great graphics in this. The animated bushes looked strange at first, but I like them now.
The only thing that might be an annoyance is having the switch blocks at 1:13, where if the player didn't press the switch at the beginning of the level, they would have to backtrack. Other than that, the level is really well-designed.
So you would be able to buy stuff using your bonus stars? Does that mean you would take out the regular bonus game?
For what you're doing, it might be easier to make a custom block that stores one more in the bonus counter, and then put that number into the coins when the level is over. Although you seem to know what you're doing.
This hack could be really cool. Just don't use only cement blocks, add some decoration, and throw in some unique puzzles and this could be a good hack. You probably have this planned, but a custom overworld would be nice, since it doesn't really make sense that the yellow switch is pressed just by surviving in the level.
I agree that koopas staying in their shells would be closer to the actual Paper Mario, if you could do it.
This is just an idea, but maybe you could end some levels with the small orange bridge that levels in the 64 version had at the edge of their screens. Then just have the bridge be the end of level tiles. (You don't have to listen to me, it's just an idea.)
As one of the beta testers, I just want to tell everyone that this hack is really well done. I wan't able to get through the whole thing before C3, but what I was able to play was really good. You definitely want to play through this hack.