This is a neat idea though it would work a little better if they didn't pick 1964 for the retro year.  In 1964 you're playing Space War on a mainframe and any videogame resembling those screenshots is at least 20 years away.  The 1992 Olympics would fit this approach better since that's the first one after Sonic's debut.  Plus we get this mixing of 16 bit Sonic and 8 bit Mario when they could just as easily have used the Super Mario World sprites and had a consistent look.  And then it would also actually look what a hypothetical Mario/Sonic Olympics game would have looked like if released back in the day.

This comes across like a bunch of stuff thrown in a retro blender by someone whose knowledge of videogame history was taken off of a few t-shirts they saw some geeks wearing.  I mean 1964?!  1964 retro is the goddamn Beatles!

Somehow I suspect they're more concerned with the Olympic history mentioned in the story than video game history.

Why is no one talking about the far superior real-life mode?

https://pbs.twimg.com/media/ECZKsv9U4AADSDq.png

Oh great, so they're all just going to be "mash the A button fastest" events.

Looking at the "real life models" Sonic looks terrible but he kind of resembles what a real life version of Sonic would look like.  The character is too much of a cartoon to translate to real life without looking ridiculous.  But there really is no excuse for the Mario movie character design.  Mario's strangest features are his proportions (giant nose, short height) but by using a live actor they've decided to ignore that.  Okay, so it should be easy after that.  Mario wears overalls, a long-sleeve shirt and a hat - all real life clothing items.  You could probably buy 90% of that off the rack at a clothing store with the "M" on his hat being the only custom item.  But they've got him wearing red and blue coveralls with a collar and breast pockets.  What the hell outfit is that?  That looks like a Mario costume you'd get from someone who has never seen the videogames and had the outfit described to them over the phone.  Of course this is also the movie that depicted Luigi without a mustache so the design team was failing pretty much from step one.

This isn't hard, guys.  Look at the box art of the games and make the character look like that.  And if you're changing things on purpose because you think you know better remember that Nintendo made the iconic character that's comparable to Mickey Mouse or Superman... and you've made fuck all.  If you were so brilliant you'd be the guy that created the billion dollar franchise, not the mook buying the film rights to it.