Warning: Sprites are not for everyone
Okay; key problem. You violated a single key rule.
NEVER CHANGE THE ASPECT RATIO OF A BITMAP.
If you don't know what you're doing, which is fairly clear here, it's NOT A GOOD IDEA. When things are scaled up and down in proportion, sometimes it works. SOMETIMES, but it's really rare that stretching and squashing the same graphics ever looks good. If you couldn't tell that Mario and peach were stretched oddly, then you need to spend some more time studying your graphics.
Next trouble; If you're going to set it up like it's a Mario game, don't be so selective about what 'game-world' physics rules you follow. Mario can't roll in SMW, he can't jump as high as he does for the fire-flower, etc, etc. Be consistant with your 'reality-rules'!
You might be able to take what you've got here and improve enough to make a quality submission, but you've got a ways to go. My suggestion, buy a sketchbook, learn to draw, stay AWAY from sprites.
Better luck next time.