How do I work with tiles smaller than 32 px if the image can't be smaller in either dimension? Do I have to add empty space? Why is there such a limitation in the first place?
I don’t think there is such a limitation. Most examples are 16x16px even. The templates are 32x32, but they only regulate where the resulting subtiles are located on the output image.
There is setting for input tile size and for output tile size if you want to resize the tiles. The output tiles will be scaled to the output tile size, if you “Output resize” in “On”.