On the option screen, using Controller 2, press L, R, Start, Select, X, Y, A,
B. Do this quickly - you'll hear a chime when it is done correctly. On Controller 1, select "Exit" to return to the Title screen. Then, using Controller 1, hold the L and R Buttons, and use the Control Pad to choose your starting world and stage.
Let the Genie out of the bottle with this complete set of passwords.
2: GENIE/ABU/ALADDIN/SULTAN
3: JAFAR/ABU/JASMINE/GENIE
4: GENIE/JAFAR/ALADDIN/ABU
5: ABU/ALADDIN/GENIE/JASMINE
6: JAFAR/JASMINE/ALADDIN/JAFAR
7: ALADDIN/JASMINE/ABU/SULTAN
BONUS: JASMINE/JAFAR/SULTAN/JASMINE