The smaller-than-normal black Donkey Kong represents Bottles, a small, black mole who teaches Banjo and Kazooie their special moves in Banjo-Kazooie.
The stage and music track represent Spiral Mountain, the first area in Banjo-Kazooie where the titular duo first meets Bottles, who appears as a background character.
The Invisibility rule references the events of Banjo-Tooie where Bottles is killed by Gruntilda and spends most of the game as a ghost, who appears invisible to most characters.
Donkey Kong's favored Headbutt and the Pitfall items reference how Bottles is a mole who burrows in molehills and hides underground.