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Well... Hm... Sprites of different colors can be overlapped (I think... at least that's what some NES programmer told me), but yes, the sprite palette limit is 4. And thanks!! =3
I believe 8bit can only handle something like 4 colors per sprite including transparencies, so even though it uses the NES palette it's not really 8-bit.
However, it still looks awesome :D
@RPG Boy - Thank you.