The gameover screen (the pale one with the smoke) is really boring. I'm sure you'll replace it and I was thinking it would be good to
have two different game over screens, one for each pilot with them climbing out of the wreckage all bloody and stuff like when you
lose at street fighter.
That's a great idea, I'll probably steal it. 
And yes, the second level will be set in the wilderness. Forests, lakes, mountains. Pretty much a complete nature reserve tour, with the added enjoyment of blowing it all up.
Bloody and stuff should include shredded clothing 
+1
Is there a slim possibility of an dreamcast port?