really nice, would have been a decent conversion! 

interesting approach. a really interesting approach, even though this cannot be done or displayed that way on a c64. it is looking good but there are some issues here.

there are too many sprites on a line (8 are maximum per line), so shoots would better work as softsprites as seen in games like turrican. also sprite colors are defined as 2 colors fix for the whole screen and one individual, so the explosions would need an overlay for using yellow and dark red.

the background graphics would not work this way either... except the game should flip screens (like gryzor on the amstrad cpc). the bg matches multicolor bitmap restrictions and this will not work for an 8 way scroller game most likely. still it is interesting to see that the foreground would even match charset restrictions with minor adjustments. so - if the background would be cleared to a plain cyan - no light blue, no light grey - it might work. 

I think my favorite part of this pixel art is that you stretched the pixel art out so it looks like an Atari 2600. I know you were going for a C64, but I gotta say, you really nailed it for trying to make a really old looking game.