Love the sprites I'm just trying to understand how this stuff fits together into a game scene.
can u tell us more about the game and the perspectives etc?
Certainly. FRUA is a RPG game maker with which you could create AD&D adventures like the good old SSI Goldbox games.
It has two main views. One of those is the "3D exploration" view: a grid based pseudo-3D first person view of the village/dungeon your party is exploring. It draws predrawn wall tiles over each other to simulate the first person view effect.
Pool of Radiance (the first Goldbox game) example:

/this particular version has even harder restrictions, all the wallsets are built by using a set of 200 or so 8x8 pixel tiles!/
The village sets ar drawn as bases for the wallsets.
The other is the tactical combat screen. An orthographic (cabinet projection) view of the battlefield where the turn based combat happens.
Pool of Radiance example:

The combat icon sprites are used there.
Though FRUA already supports VGA; for aesthetical reasons and for the sake of simplicity I stick to the standard EGA colors.
Images taken from the CRPG Addict blog.