Quality is there, but not Consistently
I remember watching your first episode of your series a while ago, and liked it. Now I feel inclined to review.
For a project this size, I'm surprised that you didn't really put much effort into the preloader to give the viewer something nice to look at while they're waiting for this to load. Draw up something nice and related to your movie rather than throwing in a static image and changing the person driving the tank in the Newgrounds box. This is a small ask, but it's generally expected.
Throwing in that montage on what happened last episode was rather pointless and really did more stalling getting to the feature than reminding. Link the previous episode in the title screen or preloader and you won't have to do this. It's not like the last episode was a huge as Super Mario Bros. Z Episode 6 was, so that's why Alwin got away with the intro in ep. 7, though even then it wasn't cinematic and it was skippable.
The size is pretty darn huge. Did you compress and cut your audio? If you haven't, when you're animating, after you've reached a point where you'd like that audio track to stop, cut it in Audacity and re-import it. This does a good job on cutting down the size taken up by unused audio. If a track loops, save it as a .WAV and THEN have Flash compress it to make it loop seemlessly. Also, make sure that you compress all of your audio. Set the global setting (found in the Publish Settings under Audio Stream / Event) to MP3, Convert Stereo to Mono and 32kb/s. There's very little or no quality loss and you still have a lean file size. For stereo music files, manually set them to 64kb/s without Convert Stereo to Mono on. If you think no one will mind listening to mono (it depends on the music of choice), leaving the global setting could help further. When testing, set the quality to Fast, and for the final product, set the quality to Best.
Now to the actual movie. One thing that you should really think about doing all the time is drawing everything with Flash's drawing tools. This is because it draws vector graphics, which are graphics that can be freely resized without getting pixelly. Images and bitmaps use raster graphics, that is, they're made up of pixels, and zooming in on them reveals their true nature. Use Flash's vector graphics as often as possible, as the quality isvery high and, in most cases, the end result is smaller in file size.
You need to work on the look of the characters. As a whole, they're accurate re-creations, but their colour is a little static. Keep shading areas according to the light that would fall on them for an extra graphical kick. Keep the detail high. Also, try to make sure that all characters that are shown are being animated to prevent on them looking static.
Sometimes the sound effects are repeated too much, like walking and such. But as a whole, it's all pretty nice. Oh, and that Mario voice generator sucks because of the unnatural sound of Mario's voice and the fact that Mario wouldn't even say stuff like "You go to hell," or "You suck!". The music, as a whole, was uncompelling too.
I've read and seen that most people were taken aback by Mario having a knife and using it in its full violence. The reason why people don't like this is because it's not true to the games, and, really, you do have to be true to the game. Also, The People's Mario gets away with it because the violence is in greater context in their movie. Stay true to the series.
The second scene was underwhelming for the fact that it didn't really mean much. Why did Luigi go? Why is Bowser attacking the place? These questions are nigh-on meaningless for a story that's not very compelling.
With all that being said, at times, the quality of animation and drawing is supurb and at a very high quality, but the lapses in that quality bring this down. If the attention to detail was kept consistent throughout, this would be something really special. The audio need improvement but the SFX were chosen well at times. The story's a little dry though. Up the quality and fix these and it'll be something great!