I noticed that a long time ago, and still think it's a little weird.. The art for some of the games shows him with legs, and yet sometimes in-game, he has no legs. Mario Tennis 64 is a good example of this: the art had him in his tennis gear with short legs, yet in the game, he was just a mushroom shaped person with feet.
It baffles me when they do that.. was Toad meant to have legs, or not?
Personally, I kind of like him without legs, because it makes for some funny moments, such as in Double Dash.. if you have Toad as the weapons handler, and you steer left and right to the point where Toad's body waves back and forth, you'll see that his feet stay somewhat attached to the kart, and where his legs would be holding on to his feet, you'll see nothing!