This is awesome. A really nice idea pushing the constraints of the engine and well executed!
I would say the difficulty is a little too tough in the early levels. It feels like the difficulty ramp is almost inverted. The melee enemies probably eat health a bit too quick.
It's worth noting that I get a bunch of virus warnings when I extract the zip (that I don't get on other RGM games) - not sure what you're doing to cause that!