The diagonal boards have banding, that probably makes the jaggedness more apparent. Reduce the banding and they'll probably look better. 2:1 and 1:2 slope steps usually look fine without banding, but if you feel the contrast it too high even without banding, perhaps adding AA could help. Also, remember you can add some dips and "overlapping" dirt on them, hiding the jagginess.
To get rid of the banding with minimal work, you could make the sleepers (including the horizontal and vertical ones) mostly be that shadow colour, with smaller/fewer highlights. That would also help the sleepers look like they're in the ground rather than lying on top of it.
Your terrain isn't really 1:1, the rock shapes on the ground being wider than they are tall suggest a lower camera, something closer to 2:1. The fact that we can see so much of the vertical walls without them being squished vertically also suggests a lower camera. The character movement might be 1:1 (but that could be changed if you wanted to), but it's not likely to be noticeable as a problem.
You're right that most players won't think about it. Sword of Mana mixes 2:1 and 1:1 and even lower, almost side-view cameras and no one bats an eye xP