The true reason Bad Boon created the (harder) levels from 2 and Deluxe, and why the first games levels were created by the Gods from The Banana Sanctuary
Bad Boon created the stages from SMB2 and Deluxe to torment AiAi and his friends, most likely to trap him forever as to prevent AiAi from stopping Bad Boon. The "Banana Gods", however, created the original stages to test those who seek their golden treasure. The Pirate from Banana Blitz is afflicted with Bad Boon in some way
Both steal bananas, Both have flying ships and both have space station bases. Ultra Heaven is a place where Good-Hearted/Skilled Monkey Ballers go after death
It is called Ultra Heaven. A (Possibly slightly reformed) Bad Boon hosts the Master Stages (as well as the rest of challenge mode) in 2 and Deluxe
Challenge Mode takes place after the events of Story Mode, where Bad Boon, tired of being evil, turns his stages into a challenge run where any one able to beat them are rewarded with bananas and prizes, creating new stages (Beginner Extra 10, Advanced Extra, Expert Extra, Master, Master Extra). The reason many of them are so evil is because he's still a evil genius, and he didn't exactly turn good. The monkeys are actually aliens
Think about it. They look rather strange for monkeys, and they can run to over 50mph and can survive hundred-foot falls multiple times. Then there's the case with the titular Super Monkey Balls, which are outright stated to be made out of some sort of magical energy in Adventure. But this theory is taken to it's peak in the final world in Super Monkey Ball 3D, Mystic Dome. The world's description mentions several ancient machines still working in the ruins, but their purpose is unknown, and in the level itself there are monkey idols and even UFO's and a giant monitor where you can faintly see A-Baby and a picture of a planet (presumably Earth or the 'monkey's' home planet). The series never took place on Earth at all, but rather the alien monkeys' home planet
Adding on to the above theory, we never actually see any humans any time during the series. There are cities, amusement parks, and even space stations seen throughout the games, but its always implied that the native monkeys built them themselves. The native animals sometimes have rather funky designs, specifically the octopi and giant birds from Banana Blitz. And the series has had its fair share of Eldritch Locations, including, but not limited to; a mall floating in the sky, an inexplicable Level Ate zone, a whale that swallowed an ENTIRE CITY, and possibly entirely new dimensions! Heck, one of the minigames in Banana Blitz involves capturing aliens with a UFO!In the GameCube games, if a minigame ends in the Under the Sea and Space Zone levels, the ceremony will take place there. There we see the monkeys perfectly fine despite being out of their balls and in a place without oxygen. I believe that all this time, the monkeys were able to breathe without oxygen, but they use the balls for safety reasons/tradition/whatever. The monkeys have retractable tails
Once again adding to the aliens theory, (though this one may be stretching it a tiny bit). If you look closely, Meemee's design from Monkey Ball to Adventure has a stubby tail much like Aiai, but from Touch & Roll onwards, her design is Inexplicably Tailless. Also, since Baby is always wearing a diaper, we never actually see what his tail looks like, if he has one at all. It's possible that the monkeys naturally have long tails, but most prefer to keep them retracted as a tiny stump or have none at all, most likely to provide more convenience inside the ball, make clothing feel more comfortable, or maybe just to make a fashion statement. I consider this theory part of my personal headcanon, even if it has an extremely slim chance to be confirmed.