When I was younger, I tried to sit down and write a bit of Mario history but I didn't really get much written. Among my notes, I had this pseudoscientific-evolutionary theory about the Toads (which I considered "Mushroom People" and still do to avoid confusion with the character Toad).
It went kind of like this: At some point in the Mushroom World's past, there existed a race of ape-like beings (the parallel universe equivalent of human ancestors), who somehow got "infected" by a particular type of parasitic fungus. These people passed this "disease" down to their children, and eventually the fungus started taking over part of their bodies. By a lucky chance these infected people learned to cope with it and eventually the two life-forms formed a symbiotic relationship. The fungus formed a protective mushroom shell at the top of their heads (instead of hair), providing insulation and protection from the cold winters and storms, and in turn, the fungus allowed itself to absorb some of its host's nutrients (stunting their growth in the process, hence their small size and unusual facial shape). In the mushroom world, many species of fungus have special uses, such as healing, and this served the Mushroom People's ancestors well. Eventually, they outsurvived the other humanoid races and developed into the race we know today.
However, on rare occasions a Mushroom Person may be born defective (or "uninfected", depending on how you look at it), where the fungus is unable to take over the host's body, resulting in a more fully-sized human who possesses no mushroom parts. I suppose if you wanted to parralel their history with ours, the "defective" ones would have been the ones most discriminated against until over time proper discrimination laws were set up by the government (incidentally, a monarchy known as The Mushroom Kingdom). It's lucky that these laws were set in place, for who would have thought that soon a Princess would be born without a Mushroom? Yes, Peach Toadstool, who grew to be at twice as tall as her parents, and grow long, blonde hair, and human-sized dresses?
...That was the gist of it. I know it's flawed, but I was a kid when I wrote about it, okay?
As for the origins of Mario and Luigi, suppose the "Stork" from SMW2 might be thought of as a special "Adoption Service" that mails orphans directly to you? I mean, we only saw Mr. and Mrs. Mario from a glance, but they look kind of old, by the looks of their wrinkled hands and arms. Perhaps they were too old to have kids, so they took on some orphans who may or may not be from the Mushroom World? There's my cent and a half.
