@thejohnston7 In short: Separate blue palettes, colour maths and the limitation on how it affects sprites.

The long answer is that layers (which includes sprites) can be blended with other layers. More specifically, "upper" layers (usually BG1 — the foreground —, BG3 — the HUD, messages, mist and some backgrounds — and sprites in SMW) will selectedly (in that it's toggled with individual layers) blend with all the "lower" layers (which BG2 — most backgrounds — usually is in SMW). However, sprites are a bit special since if they blend as an "upper" layer, certain palettes will never be selected to be blended together (these are gold / player, silver, blue and yellow; this contrasts red, green and the two local palettes which can blend together). This inconsistency can be intentional (active vs. inactive ceiling Boos like in Donut Ghost House) but also often results in unintentional blending as it happens here.
Furthermore, the Magikoopas write their colours to a local palette which keeps other blue sprites like p-switches in changing colours, alongside being affected by colour maths altogether.

It's a bug that got fixed in the version for GameBoy Advance:
https://www.youtube.com/watch?v=WS8epc3CIyI
2:26:08

When I played Lemmy's castle, I noticed that when the Magikoopa faded, the P-Switch was graphically unaffected, but the mushroom in the item reserve box seemed to fade with the Magikoopa. What's that all about?

@Smithy That's actually its tooth.

Changed the green bg to a darker tone ot make the shape sfx more visible.

I just noticed this Magikoopa has a mustache like the one in the NP Mario World comic.

1. Open ZSNES, make a quicksave when Magikoopa is on the screen.
2. Open the quicksave in vSNES.
3. Open the SceneViewer and the PalViewer within vSNES.
4. Hover over the Magikoopa sprite in SceneViewer and the PalViewer jumps to the corresponding palette which is used by the sprite.
5. Make a screenshot and put the palette on a sheet.
6. Now you start ZSNES again and make a quicksave once Magikoopa starts fading in.
7. Same procedure, but Magikoopa's transparency isn't shown within vSNES. Doesn't matter, we only need his regular sprite. Change the bg colour to something neutral like pink, save the image and put his sprite plus some copies on the same sheet.
8. Disable all layers in ZSNES and start screen capturing Magikoopa's transparent sprites (F1). Since the background in castles is black, his outlines get eaten. This is where the vSNES sprite and the copies come into play, put the sprites with the corrupted outlines above the copies and your transparent sprites are complete. The outlines for the regular sprite and the transparent versions are both black.
9. But how to get the palettes? Personally, I use Recolor (v.1.6, a tool by Previous) to swap palettes back and forth between the transparent ZSNES sprites and his normal vSNES version. This also changes the Magikoopa vSNES palette and now we have a custom palette for his transparency. Now do this for every single frame.
10. I used the same procedure on Big Boo & the Boo Buddies from the Sunken Ghost Ship, which also use transparency to fade out/in.
11. The "fixed" version comes from a simple palette swap between the regular (wrongly encoded) palette and the correct one. Both can be found in vSNES' PalViewer.

What's convenient?

Isn't that convenient?

@P-Tux7

1. SNES viewers (as far as I know of) don't have the transparency as seen in-game. (That's the best I can explain it)

2. Magikoopa doesn't have a fade palette in Super Mario World: Just Keef Edition. If he did, I would've included it before I submitted the sheet.

How did you rip the transparent palette? That would be useful for ripping the Just Keef Magikoopa's palette.

@The Magikoopas appeared first and Kamek came around much later in Yoshi's Island. There's been a few times he had a unique design to differentiate him from the regular Magikoopas before.

Isn't that MagiKoopa supposed to be that jerk Kamek that tried to kidnap baby mario from Yoshi's Island?

Every time I see Magikoopa in this game, I always think of that one episode on the Super Mario World show when he captured Mario, Luigi, Princess Peach, and Oogtar. And Yoshi had to rescue them.