Everything is explained in the INSTRUCTION HERE file. It says that the "<L>" and "|" are just special codes specifically designed for the text alignments in the game. Which means that for the translation, you have to ignore the "<L>" and replace the "|" with Space.
WHAT A COINCIDENCE ! I also use paint.NET for modifying those sprites. However, don't write on the images (except for the RESUME image if you want). Just make a translation list in another file instead. I'll take care of the sprites modification later.
Actually, I already play some of your games. They aren't great games, but still enjoyable.