Why does Peach not rule out being Bowser Jr's mother in Mario Sunshine? Because there's storks in Yoshi's Island and presumably one could have brought Bowser Junior which may have come from a stork ordered by Bowser to him and Peach.
For the prime games, it looks like the inside of the ball is just energy, so I guess it converts her physical form into energy. The real question is why isn't this technology used for applications beyond rolling around in ball form.?