I've run through the first stage again and improved it by ~46 seconds compared to my last run. 12.5 seconds saved from skipping both the title screen and the intro, and 33.5 seconds from choosing a different path. I've noticed that since this difficulty greatly increases the amount of enemies that spawn, going to rooms which has enemies that always spawn at a fixed rate (like the trains) will take longer to clean up, so I'll have to avoid such rooms.
About Mecha Santa, I think I might know why he's "impossible." Given the image Billy Johnson shown us and which attack Mecha Santa is using, he'll throw out full rows of projectiles and if you try to piledrive block them, he'll continue to shoot his Artic Thunder which can't be blocked. I won't know until I finally reach him, but I believe I should be able to use my Ice weapon to remove the projectiles instead. And if I still have to try and kill him before he kills me, I'll actually get an extra life for every stage I finish, the only courtesy the game will give you apart from 8 Ice and Rainbow and full health at the beginning of a new stage. So you'll actually get a total of 3 extra lives before you fight him.
A little side discovery that every second time Ice fires, it shoots two projectiles for two frames instead of only one. That should mean it actually does 0.3 damage/frame. So it should be useful for bosses as well.
No encode at the moment, but I'll look into making one later on.
Here's the .WTF file for anyone who's curious and wish to try and play it back yourself.