You won't find 'downstair' in the Oxford, or the Cambridge.
It seems to me this is another example of 'famous for being famous' : if enough people have slovenly pronunciation or wonky grammar, it will become sufficiently widespread to turn up in American dictionaries...and then others catch the virus of 'it must be acceptable to say it like that'.
Maybe the 'downstairs toilet' sounds like possessive case to some people = downstair's or downstairs' toilet. So when they then refer to the toilet on the ground floor, it becomes the toilet downstair.