Revealing mistake: In the live action segment, when the smoke billows from the furnace, it appears to be sprayed from a hose. (00:18:06)
Revealing mistake: When Toad notices Cheepy, Cheepy's eyes are mostly closed. (00:14:52)
Revealing mistake: When Mario jumps over the gap, his friends are briefly layered over him. (00:07:55)
Answer: "Club Mario" was reruns of the original show repackaged with new live action segments. It was a cheap way to present the old animated episodes as a new show. Club Mario was incredibly unpopular and eventually reruns of the original show with the Captain Lou Albano segments were aired in its place.
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