I love the idea of creating a short loop that you play variations of, really fits the OST where each level had relatively short loops. I could see this being in a 16-bit remake or in an alternate world where SMB was made near the end of the NES life where they had more hardware to make more complex soundtracks.
I also really vibe with the jazzy feeling you described, it fits the underground level really well.
I think the pads in the background could benefit from either being swapped with another 8-bit sound, or an increased attack. Because of the other sounds having such high attack, the pad sometimes sounds like it’s off-beat in a distracting way. The low-pass filter might also be too strong, I think some of the sounds could benefit from some higher frequencies to give them more impact that drives the music forward.
Overall really nice sounding piece, well done!