Actual flight would mean Nintendo letting go of the leash a little. Flight was always a gamebreaker. Raccoon flight was at least a little limited and a little integrated into gameplay, but the Cape and the P-Wing just let you skip entire levels instead of going through them the way they're meant to be played. And that's why they're fun.
Modern Nintendo is afraid to let go of the player at any point. They could have made the Red Star usable on any level in Galaxy; made it into a P-Wing that just lets you do whatever you want, completely skip over entire sections, go to places you weren't supposed to in ways you weren't supposed to and probably run into glitches, just like you could with a P-Wing or a Cape, but some players might get confused and frustrated at the glitches. But that's what made it fun.
Ultimately, you can't design a game as fun and timeless as SMB3 because, as expertly crafted a game as it is, so much of what makes it perfect wasn't designed at all.