To unlock Luigi, collect all 120 stars. Go to Rosalina on the Comet Observatory and ask to fight Bowser again. Defeat him to unlock Luigi.
Grand Finale Galaxy:
To unlock the Grand Finale Galaxy, with Luigi, collect all 120 stars and defeat bowser. The Grand Finale Galaxy is the Star Festival seen in the beginning of the game.
To get the 121st star, collect 100 purple coins in the Grand Finale Galaxy. The 121st star is the final star. Your saved game file will now display how many lives you have lost.