You've chosen complete unfairness as a design choice; changing this isn't "watering it down". You've watered the game down in a way with cheap shots that require repetition and save states. If you want to make this a great hack, change all the cheap kaizo stuff to something that works without so much frustration and guesswork and still retains the challenge and creativity of the levels. I'll give you my impressions followed by what I think would make this better.
* * * Here's Level 1 as you currently have it * * *
Take a second to look at the level and I am immediately shot by giant cannonballs from the wall, die. I try again and move to the center to jump up so I have more time to react when the cannonballs come, but there's invisible coin bricks in the center blocking the way up, and I die. Found out where I could jump up then start jumping to try to find the next part to go up, and it's more invisible coin bricks, blocking the whole way. There's got to be a mushroom or something. found a vine, it's in the center. Since the screen scrolled, now the cannonballs aren't synchronized, so now it's not even cheap in a controlled way. And to add to the annoyance, the vine is blocked by an invisible coin brick I didn't know I wasn't supposed to hit, and I have to suicide. Made it up the vine, found invisible coin brick for a vertical jump. Now there's a ledge with no way to tell where to go-- It's a blind leap. Overshot, died in a pit. Try again, landed on the platform, and a bob-omb pops out of an unmarked brick with no warning and I die. Try it again, and it's another blind jump, no idea where the platform is, die. Try again make it, and a few jumps I can actually see, then at the top another blind jump. No way to make it, except I see a cannonball, so I guess I have to jump on it with ridiculous timing. After a million save states, I make it, and there's bouncy blocks with flames coming out. Get to the end and there's some shiny brick platforms. I land on it and press b to prepare for a speedy jump, and it's then that I find out these are the bricks you can pick up, and I die (They are purple white and blue bricks). Now I see that I do actually have to pick them up, as I jump, which is really hard. Made it. Now I have to time getting through before this little cannonball shoots me, made it, and below there's a platform that flames up, but I saw it earlier when I died, made it to a few more jumps, then there's one that just looks impossible without a wall jump. Made it. Get a little farther and die from another unmarked giant cannonball. I try again, and try to rush over the platform it comes out of, miss, but I see ground I can land on. Try again, land on it, beat the level.
* * * Here's what I would change * * *
Here's what I would do to preserve the challenge without requiring so much tedious trial and error. A lot of this is just letting the player know beforehand what everything does, if not outright then with clues:
* Giant cannonballs coming out of the walls have bad conveyance. There's no way to see that coming. You can fix that. Start the player in another room, and introduce the cannonballs in a controlled way, where they shoot overhead, using some kind of cannon graphics on the walls they come out of, and there's a door. It's a one way door that leads to the level as you have it now, but add cannon graphics so you have an idea that you're about to be shot if you don't move. It's still a bit of a cheap shot, but when the player dies, he can feel like it's his fault and the game outsmarted him.
* Cannonballs not synchronized - I'm not sure the best way to fix this but it really does make things a little sloppy.
* Invisible coin bricks. These are made to give Mario a nice help through a bit of experimentation, kaizo uses it as the opposite, to screw over the player. Unless the goal is to annoy the player, you can keep most of the difficulty without the frustration on these too. Make a background marker for the locations of invisible bricks, so you know where they are, but they still pose a challenge (with the giant cannonballs and tricky jumps).
* Blind jumps - These are just annoying because you just guess how to jump. Find a way to tell the player where to go; add coins to collect in an arc where they should land, or some kind of arrow background tile would work great. You could also have some clue like background chains leading downwards that appear to hold up platforms. This would give the player a chance to correct mid-jump and feel like they could have made it if they were better.
* Bob-ombs coming out of a brick without warning - Get rid of this. It isn't even difficult; you've captured the frustration without the skill on this one. Once you know it's there you'll never die to it again. Make it hard, but more clear, even if it's a caged hammer brother.
* Ice Bricks - If you're changing the palette you should reintroduce these in a controlled way. That's a good idea even if they looked as they originally did tbh. You can put them somewhere earlier in the level where it isn't completely fatal if you grab it.
* Needing save state - you say you need save states to play this; this is a bit bad design, you can work around this, and people still have the option of save states. It feels too cheaty to use them to a lot of people so it takes away from the fun. For starters, give the player infinite lives (or at least a lot more lives). Another thing you could do for this specific level is make a way to reset things without death. Add spots where if you mess up you can enter a door and redo it. Even if it starts the whole level over it'd be a big improvement and appeal to those who don't use save states.