True, there are priority issues, but I think that the characters, items etc should be sharp as hell compared to most of background. It serves the gameplay well.
To make it all fit together visually, tho, I'd recommend selectively sharpening bits of background, like tips of the tall trees and other bits that are far above the ground level.
Also, I'd make the bits at ground level, like the bases of the palms or cacti, blend in a bit more with the ground.
This is commonly done in traditional drawing, for instance using thicker strokes to denote boundaries between surfaces with larger differences in depth.
When you look at your tree, it's top is much further from the ground seen behind it than the tree's base.