Small world- I just finished watching this again today. I've been trying palette-cycling techniques with 32blit to see if I can learn the ropes and put together a half-decent tutorial. I've had these - http://www.effectgames.com/demos/canvascycle/ - up on my screen for the last few days. I managed to get - terrible - palette-cycled fire sprites working with smooting (which Joe calls "Blend Shift Cycling") and I think there are still some interesting interactions to be found between these classic techniques and modern hard/software.

It's really exciting to see renewed interest in these techniques and "8-bitish" games in general since it probably means we've chosen the right time to make our handheld.