Diagonals do register as a combination of up or down with left or right. Consider it a four way joystick :)
As for assets, openly licenced ones are preferred, so if the licence says you can use it, then that is fine. Be careful with CC NC licenced material as it is very broadly defined and easy to unintentionally infringe. Best to ask author for those.
In short, anything that might run on a Raspberry Pi 2 is our baseline for what to aim for. It has OpenGLES (not OpenGL), so 3D should be okay. However, the teams behind Flash and Unity have not made versions for this architecture. While games written in these (and other) frameworks won't be able to run on the arcade machine as it stands, for the right game, we can try to find a suitable computer to put in there temporarily.
What we are most interested in, is helping people with good ideas. A game that is fun to play but can also tell us something interesting or unknown about illustrations or sound? That is a hard problem, and we want to support anyone trying to make something that might tackle this!
