I want to know if I understood correctly: I can use any game engine as long as I follow every restriction the console that I'm doing the game for, has.

For example: Resolution, color palette, sprite limitations, etc.

Great question! This Jam is for games that run on the target platform, either under emulation or on real hardware. If the target platform is retro, you can use any tools you like, but the game does need to run on the retro platform.