Nice application of index painting. makes for a cool effect - it'd be great if you can get the engine to dynamically render it rather than have to bake it out as an animation. I'm assuming you used index painting methods on the tiles too?
Hi I love your work! If I would know how to make the engine do it I could do much cooler stuff, but I'm just 1 person and a hobbyist artist and programer, I only used dynamic indexing for the tile walls because that's when I found about it(it saved me a lot of time).
I think this method is really good with AA animations so I'm going to use it for the avatar that's supposed to change according to life status.
This is how it looks so far, it's also just 1 ramp as you can see, so it would be easier.

I've made a thread about it here, if you have any pointers I'd be more than happy to hear.
http://wayofthepixel.net/index.php?topic=18076.0