Yes, it's all in Godot. The live sprite updating involves rotating every layer of the stacked sprite every frame. Here's a video about it, if you're curious
I watched that video before when I was starting out with Godot. I was wondering more about detecting file updates. I tried it before in Godot 3, but couldn't seem to get it working.
Ah right, for that you save the file location and have a timer that constantly checks to see if the file's last modified time has changed. If it has, the file has probably changed, so you reload it
