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Kinda, it was in the original, but only through Gameshark and the like, so in the X-Box Live Arcade version, they added it in if you had Nuts 'n' Bolts, so you could unlock special parts for said game.
Ah, not heard of that one. I've heard a whole number of secret islands and levels, such as "Hammerhead Beach" and all those beta levels (boy, do I wish they existed as an add-on for the X-Box Live rerelease, like they did for the Stop 'n' Swap)