Love it so far. Super charming look to the entire presentation, and the skirmish elements are fun.
I especially like that you got in a boss enemy that's larger than the usual sprites – that's cool. Not a lot of games like this do that!
The underlying skirmish mechanics feel good and seem straightforward and clear. You do feel like you can make decisions about how to best take on the enemies. And having different characters with different capabilities is pretty nice, too. Overall, a great flavor and puzzle-ish space for the combats. Love it.
Selection of characters and their actions is a real pain point, though, especially once you get some summons on the board.
I'd recommend to switching away from the stepping through characters to just a spatial interface, so that you select your next character to act by using arrow keys to move a cursor to a character with a green dot by it (I'd also make the green dots more prominent to assist with this).
If that's not feasible for some reason, I'd change the order of the stepped-through characters to be top-to-bottom-left-to-right so that if you want to select, say, your wizard, you can zip through the characters until you get to them, because the order is more predictable. As it stands, it feels like the cursor is randomly popping all over the place, even though there is a set order.
After attacking, it would be handy to auto-select the next character which hasn't acted yet.
It's also kind of easy to accidentally trigger a spell when looking at your options. Would recommend always having X to act and Z to cancel. When you select a character, pop up an interface that lets you choose their action between their normal attack and their available spells, navigating them with arrow keys, confirming with X, and canceling with Z. That way, nothing commits until you X and you can always reliably back out of something with a Z.
Since you show the enemy's health at the bottom when an enemy is selected, you might consider also showing their attack value alongside it.
I hope the above doesn't come off as being too critical. I really think this game is pretty great already, and would love to see it develop further. You've done an excellent job on it – easily one of my favorite PICO-8 games I've seen, up there with PicoHaven and others. Well done!