Why was Baby Luigi crying when the Colbalt Star spirit was talking? It wasn't really a Star Spirit, it was Elder Princess Shroob! Apparently, Baby Luigi could tell somehow!
Once you know the secret of the Cobalt Star, it makes some of the actions involving it seem somewhat odd; if it contains the spirit of their leader, why do the Shroobs react violently to it and keep the pieces far apart, even feeding one to Petey Piranha? And conversely, why does the Cobalt Star assist you in finding its pieces even though that jeopardizes the invasion? Then you realize that those two questions answereachother.
To add on that, look at how Elder Princess Shroob treats her subjects once reformed; she smacks away the Shroobs that deliver her drinks once she's done with them, and will gladly shoot down her own ships just to try and hit the Mario Bros. Is it any wonder why the lesser Shroobs might not be too keen on allowing the Cobalt Star to be rebuilt?
The real question is, since Toadiko was present when Peach arrived in the past, why would she tell you to gather Cobalt Star shards?
Most of the Toads in present-day Peach's Castle express confusion over how a few of the mechanics in the castle work. Given the Shroobs' takeover of the place, those mechanics were likely leftovers from the building's makeover.
How come the Elder Princess Shroob can speak English? Her fractured spirit in the Cobalt Star has been in the possession of the Mario Bros. throughout most of the game. She must've picked it enough up during the adventure to form some basic sentences.
Despite her name, the boss Mrs. Thwomp actually doesn't resemble a Thwomp all that much. Her face and her having arms make her look closer to a Whomp. Mrs. Thwomp's name might not be representative of whatever species she is, but rather one that she took from marrying Mr. Thwomp.
