From the Super Mario Wiki
Madam Merlar is Merlon's deceased ancestor who appears in the game Paper Mario. She exists as a spirit in a hidden room in Shiver Mountain. The wall to her room is just an illusion; Mario can walk right through it. Madam Merlar is a messenger of the Stars and she knows the secret of the Crystal Palace. Her role is to help Mario reach the entrance of the palace by giving him the Star Stone. Merlar shares the Merlon clan's "ability" to tell long-winded, drawn-out stories that can put Mario into a lengthy sleep.
After the stairs to Crystal Palace arise, Madam Merlar's room will be blocked off for the remainder of the game. That is because the staircase that the Star Stone made blocks her chamber. However, Merlar is present in Paper Mario's ending parade, where she performs magical effects alongside her relatives.