I really like your ideas for this hack! Seems very fun.
Question, though, what do you plan to do with the timer? You say we explore the first 3 levels trying to find the entrance to the castle, and a timer seems like it'd be bad for the exploration / open world you are going for. So it made me curious what you plan for that.
Also, just a small critique, Mario's palette seems too bright in Bunny mode. The design of the ears is great, though! Nice job on that.
Good luck on your project, and as you learn ASM! Looking forward to what you do next.