Love this idea; I am planning to do a similar thing under a pine tree!

Plants are best when planted in actual soil. Move the build-up, plant and then pull the grassy mulch stuff back up around them.

And just an FYI but magnolias tend to have a lot of surface roots so creating a good planting bed under them can be a chore!

@gardengal48 Could the OP mound dirt up around the tree and plant hostas there, or would that smother surface roots of the magnolia tree?

No piling of soil around tree roots!! Just even as little as a couple of inches can smother tree roots.