I will second pretty much everything David said, though I definitely did not get that chest star on the first try!
Here's something I learned. As I mentioned in another thread, I've been 100%-ing each level before going to the next. For the first time, then, I went back into Dire Dire Docks after getting the first star instead of continuing immediately to Bowser. And it turns out that the state change in this level is not tied to which star you select, but whether or not you've beaten the second Bowser level. In other words, the submarine does not go away, the metal plate in the wall does not recede, and the yellow-black poles do not appear until you get the upstairs key. As far as I can remember, DDD is the only level that changes in this way. (I got really frustrated for a while, too. It was literally impossible to get the red coin star, but I was determined to do so before moving on.)
I'm kind of mystified by this design decision. Most players won't even notice it because they won't try to get every single star before hitting the Bowser level; those that do will probably just get frustrated like I did. Why not just make the submarine disappear after the first star, just as the top of Whomp's Fortress appears after being the first-star boss?
My guess is that this is some kind of pseudo-plot development -- Bowser's sub "escapes" after he's defeated, or something like that. I'm reminded of the alternate "exits" some levels have -- try falling into the pit in the Vanish Cap course -- and of the "characters," like the Bob-ombs and the penguins. Maybe there was some ambivalence about how artificial the world felt?
I should also note for the completionists that the 100-coin star here rivals Hazy Maze Cave for thoroughness. In fact, there are only 101 coins in the whole level! Still, since it's easier to navigate this level I don't think it's quite as difficult -- your only serious threat is getting sucked out to the moat, and none of the coins are particularly well-hidden.