I watched for a death and it didn't happen... he lost his Yoshi but he didn't take a second hit that would have killed him. The Mario sprite vanished for a bit but that's not uncommon. Plus the Mario x16 (or 10, can't quite read it) never changed.
Absolutely amazing that it took 17 years for such a carefully crafted secret to be revealed.
EDIT: Never had an SNES (I went from an NES to a Genesis), some folks are saying it's a custom level... anyone confirm that they played this one? Looks like a pretty well designed level so I'm not sure.