So, since I've been fucking around as Croaked!Toad for a... while now, there is actually established lore for this verse!
I've had it in my head for a while that ya boi Toady became a ghost after dying in the wars for the Homelands. Behold this art of him dying in Blue's arms a long time ago.
His reason for not passing on is literally just because he is a stubborn fucking bastard. Also, people keep telling him to go, so now he won't.
In this form, Mr Toad can possess vehicles. This is the result of some fucky Fable shit caused by mundies continued awareness of his story strengthening him despite him being dead.
He's also finding new fame amongst the mundies through ghost sightings, which is further empowering his irresponsible spirit to do whatever he wants.
Stop keeping Mr Toad in your thoughts and prayers! He's growing too powerful!