Obviously, they're meant to be reptiles. But I'm a nerd and I think these things through too much. I mean, c'mon. I have a lot of theories to make sense of it. SO here goes nothing.
There will be talk of mammaries in this article.
1. They're actually warm-blooded.
A lot of kritters and maybe a single krusha hop/strut around in the icy peaks of Gorilla Glacier, in the first game. The second game had krunchas walking about merrily in K. Rool's own personal ice storage. And let's not forget the skiddas around the K3! A reptile wouldn't last in those icy areas for more than an hour.
Not to mention they run around for little reason nearly all the time. Real crocodiles lay about in the sun all day, only moving to eat or mate, being dependent on warmth to survive. Kremlings usually also spend time playing video games and running after crystal coconuts, among other frivolous pastimes.
That, and King K. Rool clearly blushes in shame, in the episode Just Kidding.