I agree with the Super Mario Bros. theory. The Mushroom Kingdom used to be inhabitated by humans along with other species, like the Goombas, Koopas and Bob-ombs. They were later turned into mushrooms starting an entirelly new race: the Toads.
Peach probably has to be married to become a queen. Her parents were probably turned into Toads like the rest of the humans, but for some reason Peach wasn't transformed (probably because she was in another castle
)
Each species has there own homeland in the Mario universe. In my theory, Toads never exhisted until Bowser transformed all humans into Toads. So...
Humans - Mushroom Kingdom
Piantas & Nokis - Isle Delphino
Yoshis - Yoshi's Island
Mario & Luigi were never transformed into Toads because they were in Brooklyn. After they were abducted by Kamek, Yoshi returned them and their parents sent them there because they thought it was safer. The later returned to the Mushroom Kingdom through a chain of pipes (Mario Bros.) and when they arrived all humans were turned into Toads.
Their parents are probably dead by this time, saying as Mario and Luigi are full grown adults.
List of humans:
Mario & Luigi - Theory listed above
Wario & Waluigi - I've got nothing.
II Piantisimo - The reason he isn't a Toad is because he is a resident of Isle Delfino, not the Mushroom Kingdom.
E. Gadd - Luigi's mansion was located off in the distance, and Bowser was never really aware of this area. E. Gadd was simply inside the mansion sucking up ghosts. During the time of Bowser's reign.
Ghosts of the Mansion - All died before SMB.
Peach - When Bowser appeared her parents protected her from Bowser by hiding her and therfor she never was transformed into a Toad.
Daisy - Remember, Daisy made her appearance in Super Mario Land for the GameBoy. She is a resident of Sarasaland, not the Mushroom Kingdom. Since Bowser only tried to take over the MK, she was never transformed.
7 Kings of SMB3 - Because of the power of their wands, they were never transformed. Notice how when their wands were stolen then they were transformed. (Ha! Now that is a good theory!)
*If there are any more humans then I will try and add theories for them.*
The seven little koopas were created by Bowser. Bowser Jr. is more of a combination of all of their powers. The Koopa Kids are just Koopas that have been "enchanted" so they are simply more ferocious-looking.
Bowser does seem to have a desire for Peach. In Paper Mario he wants to marry her to gain power over the Mushroom Kingdom. In Mario Sunshine he kidnaps her and convinces Bowser Jr. that she is his mommy. He apparently has some desire for Peach, as why else would he come to Isle Delfino and kidnap her?
In my oppinion, the Mario Karts are just simply spin-offs. They have no connection to the Mario timeline that I can see, especially one like Double Dash where the characters can team up together. The Mario Parties, on the other hand, have bit of a story behind them and therefor could easily combine with the Mario timeline that I speak of.
Thats all I've got for now!