Quoted from ScottyC:Excellent! Seems to be hit or miss on the toys as far as size.. Good luck in the hunt
I was at Target recently and saw a Super Mario Bros Chess set that looked like it would have had appropriately sized toys. It's kind of pricey if you were just going for a few figures, though not bad price at all relative to most mods in this expensive hobby:
http://www.target.com/p/super-mario-chess-collector-s-edition-board-game/-/A-14044838
I haven't personally purchased and installed any of the available options in my machine yet. I seem to recall at some point seeing mystery sealed bags with SMB toys where you wouldn't know which one you would get, but those were also small enough. I can't remember where I saw them... maybe Target or something. I think most people are finding figures on eBay, but not sure if there's any particular recommended set.
Personally, I'd want to stick to toy representations of something present on the pinball machine, instead of expanding into characters that aren't on the pin.