My theory?
The Mushroom Kingdom is wherever Mario is.
Mario exists within the hearts of we fans.
So, The Mushroom Kingdom exists within the hearts of we fans.
Numerous religious leaders and philosophers have said that paradise, or Heaven, or enlightenment, are found within the heart of man(kind).
Therefore, The Mushroom Kingdom is Heaven.
Totally made sense, right...?
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"Love... How do I explain it? Love tells you when you want to be with a person forever. It makes you feel happy just to see that person happy... smiling, having fun. When you love someone you will do anything to help when he or she is in trouble." -Princess Peach, Paper Mario: The Thousand-Year Door