Given that it seemingly exists inside a random object in Wario's own world, yet contains its own sentient people and creatures as well.
Was it created by a magician at some point? Did the people living in the Peaceful Village and Town in Chaos originally come from the 'real' world? How did Rudy find out about it anyone?
Some people did bad things i guess and they have been cursed for their actions and so somebody created Rudy and the music box world as a punishment and now their descendents have to live their forever.
Certainly something that could be worth exploring. I'd like to see this place come back (and some of it's inhabitants too-- those fellas that showed up in Dr. Mario 64).
A backstory for this would be interesting, I'd suspect.