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I don't find it all that hard to believe. Most everyone I know who has a Wii bought Paper Mario from the VC. Oddly enough more than half had never played the game or series prior to, with the exception of the Wii iteration.
For the sake of popularity, you must also consider the fact that the Wii Shop is a web interface. Tracking views and sales would not be hard at all. Take that into account with the fact that your Wii probably sends out gameplay time statistics while in Connect24 mode, and you have yourself genuine tracking. Also, if Nintendo is indeed taking into account gameplay time into popularity, you have to consider the fact that Paper Mario would be played in much longer intervals. The Japanese play the shiz out of the original SMB anyway, so that could be a contributing factor.
To put it into perspective, how much time do you spend in the average play time of each title? I've honestly never spent more than an hour in one sitting playing SMB. By contrast, I've delved into Paper Mario for well over an hour on occasional sittings. As I said before, your average Japanese player would probably lean more towards SMB play time, if not directly opposite to mine.
...nevermind the fact that Paper Mario roolz.
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