What a shame such a cool little idea has slipped through the feedback net! Unfortunately for me its late over here so you'll have to excuse me if I make little sense and my exploration into the game is stunted by sleep deprivation.
Ok, for the third time attempt to write out feedback (since pressing undo in the editor has deleted my feedback 3 times *facepalm*)
Despite the issues with having to retype out feedback, do like having the keyboard shortcuts in there when working with any image editor so nice touch.
Could definitely do with a step by step tutorial to create a button based transition. Would be reasonably easy to do I imagine considering you already have the button based slide transition format there - could even create a section of the city called the library/school to learn the basics of the software.
Love the textures for the level, compensates for the simplistic pallet (although judging by the title the simplistic pallet coincides with going for the retro look. Would personally like a gameboy original colouring for the screen e.g. green and darker green for stuff drawn on the screen.
Making a repeating texture editor would be great as well so the community could rapidly create a scene of their own imagination.
Would be wondering how the community is going to be incorporated in the creation of levels (whether you're considering a chat bar for players to talk in whilst creating and whether it'll be real time or forum posting.
And most obvious feedback being it'd be nice to be able to save levels but I can imagine the space restrictions may be an issue.
Overall a great little prototype thus far (which from the fact that you came from LD the time period you created this in is fantastic!)
I wish you all the best of luck with the project and look forward to hearing future developments!