Oh yes, of course he knew! Only an idiot wouldn't catch onto the fact that Luigi and Peasley are a thing. Mario had known this from the very beginning. Of course he was nice and pretended not to know for the sake of his beloved brother's happiness. But now it was getting in the way of everything. Always going out at night for their dates then being tired the next day. At first he at least hid it but now he technically wears it on his sleeves! The way he doesn't find the princesses attractive is really obvious and the way he looks at other men, especially Peasley, just gives it away. Of course Mario feels bad for being ashamed of this but it's ruining his reputation and even worse it's ruining their brotherly bond. Mario feels awkward around Luigi trying to pretend he doesn't know and trying to be as normal as he was before he found out about all this. And then Luigi, the way he tries to spark a conversation but cant keep it normal makes it all the more awkward. He has to change this somehow... He has to make things the way they were. He needs Luigi back, the old Luigi he remembers. Mario WILL get Luigi back no matter what it takes.