Ptoing, it depends on the engine and the game modes used. The tool I use most frequently allows for horizontal flipping but not vertical. Beyond that I'm not going to get into it, but you are talking in absolutes and general specs from Nintendo which may or may not be true based on the engines, modes, methods and tools used in any particular game.
At any rate, all the necessary info for the contest is above. If anyone dislikes the tile count, style, size, layout, limitations, whatever, you're certainly not forced to enter. But adapting to developer limitations (regardless of how practical they seem to be) is a huge part of surviving in the industry. All of the limitations above were thought out specifically based on what I need to test for right now with this contest (and yes, perhaps a bit of an over-restriction to greater showcase the ability of the artist). They aren't something that can be argued.
- Adam