Alright, here's how I have it:
There's the "Real World" of the Mario universe and the "Paper World", which I would find to be but an alternate dimension/reality. This is kind of a Hyrule/Termina case from Zelda Majora's Mask. Paper Mario and "Real" Mario would actually be two different characters. They haven't seen each other, mainly because some sort of portal between the two realities has been sealed off. Because of no continuity in the Paper World, just about anything can happen anyways.
The minor enemies in the "Real World" are just average subspecies, all with random genders and random names. They're not as particularly advanced as they are in the Paper World (Goombario, Goombella, Professor Frankly, etc.).
SMRPG and Mario & Luigi would actually be tying in to the story of this "Real World". Prince Peasley, Fawful, Cackletta, Popple, etc. pretty much found a new home in here with the enduring storylines of these games. Kylie Koopa still would be in the past Mushroom Kingdom. Because of the Baby Bros. appearing in MK:DD with the normal ones, she can come to the present era if she wanted to as well.
Birdo's a girl here (If NOA said otherwise with
joking intent, so be it...). She and Yoshi are the "main ones" of their kind (magenta and green, respectively).
The Mushroom Kingdom and the Beanbean Kingdom would be on the same continent. Beanbean Kingdom west of Mushroom Kingdom (the plane was flying that way, after all). Isle Delfino south of them. Yoshi's Island a little to the east, near the mainland's Mushroom Kingdom. Sarasaland would be on some island further west off the mainland.
http://img102.imageshack.us/img102/7039/mariomappq8.png - Rough sketch of the Mario universe map here. Did this a long time ago, so some things that aren't there I just thought of now.
As far as Wario's scenario goes, the many places he plunders are north of the mainland this time (Kitchen Island, etc.).