For the cost of 5 Star Coins, you can take on an alternate level that also lets you get to a Toad House. The southern side of the World 3 beach is close to a freshwater river, where a large colony of Skeeters live. Stay out of the water, or prepare to evade some Skull Bombs!
The safer and more convenient way of progressing through this level is obviously by staying on and over the water surface, as it is often necessary to do so to progress and you have better control out of water. However, this body of water is actually quite deep, and contains many coins scattered around deep in the river. The main enemy here is the Skeeter, bugs that skeet about randomly on the surface of the water. They can drop Skull Bombs into the water, making them a hazard if you're diving deep.
The first stage element you'll come across is a barrel. Standing on this minor obstacle causes it to roll, gradually making you descend into the water. You must keep jumping to stay on it. Above the barrel is the block containing power-ups, and to the right is the first Skeeter. Hop over it on to a small island, then try to get rid of the Skeeter to the right. While you can hop straight to the next island, there is an underwater passage below it that also has a red ring. Touch the ring to make red coins form an arc around the island, which you shouldn't have trouble collecting if you've killed the Skeeter from before.
Past the large island is several Skeeters with their movements restricted by blocks. You can stomp them for easy points, but they're pretty pointless otherwise. After some more islands and a few Koopa Troopas, you will come to a series of rotating platforms. You need to make quick hops off of each, but the Skeeters can get in your way. The centers of the rotating platforms are actually blocks that limit the Skeeter's movement, so use it to judge whether it's safe to jump. Past another large landmass is a section that requires you to dive underwater. Defeat the Skeeters beforehand, then go into the water and hit the red switch. Use the red blocks formed to reach the next island, where the midway checkpoint is.
The left block in the valley next to the checkpoint flag is a 10-coin block, and one of the airborne blocks contain a power-up. Progressing forward, you can choose to dive into the water to reach some more coin blocks, where you risk getting hit by a Skull Bomb, or take the high path and cross over the Skeeter. After doing so, drop down back to where the Skeeter is, and hug the wall of blocks. This makes the Skeeter drop a Skull Bomb that breaks the wall of blocks, letting you reach the Star Coin behind it.
There are some more islands here, but you can safely swim below them as there are fewer Skeeters. There is a block between these islands that contains a Mini Mushroom, a power-up that will come in handy later on. After the islands is some barrels, as well as the second Star Coin hovering above the second barrel. Obtaining this Star Coin only requires a simple jump, but the limited space, the rolling barrels and the presence of enemies make pulling off this jump difficult. A dash jump from a nearby barrel is the simplest way to reach it, and you can use the Koopa on the barrel to get a height boost. After a few more barrels, you will come to a warp pipe. Take it to proceed to the penultimate area of the course.
There is some rotating platforms and another Skeeter. Diving into the water, you can see a tiny warp pipe that requires dropping a Skull Bomb on to enter. This appears to be the Mini Mushroom's purpose, and while the pipe leads to a bonus area with tons of coins, as well as the first appearance of the Micro-Goomba, it is not the only area that requires Mini Mario. Past the pool of water with the mini pipe is a warp pipe hanging from the ceiling. This is the pipe you want to enter as Mini Mario. The pipe takes you to a beach with many Cheep-Cheeps. The last Star Coin is suspended at the center, but the shallow water prevents you from building enough speed to reach it, unless you're Mini Mario. Using Mini Mario's ability to dash across water, take a running leap to collect this coin. Before you exit through the right warp pipe, jump up directly to the left of it to hit a hidden 1-Up block.
After exiting from either bonus areas, one more challenge awaits. There are two sets of rotating platforms, now slightly elevated. There are still some Skeeters on the water, as well as Koopa Paratroopas between the platforms. You must use the platforms to get on the cliff to the right, where a warp pipe will take you to the flagpole section. Hop up the donut lifts to reach the top of the flagpole.
- The coin is surrounded by blocks. Have a Skeeter break the blocks to obtain it.
- This one is airborne. A dashing jump will barely let you get it, but you can use the Koopa or Skeeter for a boost.
- Go into the first of the two ceiling pipes after going through a horizontal pipe. As Mini Mario, run across the water and jump in the middle of the bonus area to collect the coin.