Coming along nicely.
Some things tho. The Space nebula like background really does not go. Too much dither, 4 colours? Really? Make it smoother and something like 16 colours.
Sure! That was honestly more of a test than anything else - I was interested to see how few colors I could get away with.
Here's another at 16 colors...

About gameplay, will this be a vertical shooter? In that case the screen ratio have in the pics with the hud is not very nice. Would be rather cramped having enemies come down at you in that. If it is vertical I would suggest a vertical ratio as well. 480x640 or something along those lines.
Ah, I see! I'm sorry, I should have explained this earlier - I forgot to mention it.
I was thinking that this would be a sort-of-mix-of Subspace, Privateer, and DoDonPachi. That's a bit of a confusing blend, I'll grant you, so I'll explain what I mean. The perspective is a combination of the isometric viewpoint of DoDonPachi, with the "face anywhere" turning and movement style of Subspace. I was thinking the Arrow/WASD keys to move your fighter, with limited strafing side-to-side, and aiming the fighter using your mouse. Rather than have instantaneous rotation to match the cursor, the cursor would have a "Ghost" trail when it moves quickly - showing the lag time between your aim point and the fighter's actual rotation. The game play would basically be a cut-down version of Privateer. Much simplified.
You play a Mercenary Fighter Pilot tasked with clearing out Pirates from a sector of space by an extremely harried Sector Governor. Illegally, unfortunately...so when you start being successful, the Military starts coming after you. Your personal reasons for doing the missions assigned are...generic.

Pirates killed your family. That's the overriding mission - you can pick up smaller, more localized ones as you progress. Simple stuff like specific pirate gang hunts, escort missions, delivery missions, etc. You play for Points, which are pretty much the money(ies) in this game. As you gain points, you can spend them to upgrade your ship - or even purchase a new one (maybe, might be too complicated, no idea) As you spend the points, your actual score doesn't decrease. Basically there'd be two numbers - The total amount of money/points you've earned, and the money points you haven't spent, if that makes any sort of sense at all.
I hope that help explain things a bit more - It's definitely not a vertical SHMUP, though.
Same goes for power. The power of the shot should be visible from the actual shot. Like you get more and bigger bullets as you collect powerups.
As far as I am concerned the HUD in shmups should really be minimal as far as screen space goes. And only the most necessary stuff should be there, things you can not easily show without the it.
Just my 2 cents. Keep it up.
Actually a very good point. Screen space is going to be at a premium, so I'm very much interested in cutting down the interface. I like your idea about the shield strength being portrayed by the color of the hits - that could definitely be done. The reason for the gun power gauge, though, is to show you how much power you have to fire your guns - not to show you the power of your shots...since you'll be able to upgrade your weapons and powerplant separately, that's a balancing mechanic to prevent you from buying all the best guns and neglecting your other systems. Sure, you could get 1-2 awesome shots off, but that's all you'll get till your energy recharges.
Hopefully this has helped to explain things a bit more. Thanks again for your comments - and I'll see what I can do about the HUD.