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Hey, thank you, and good luck with your project! 

I did a little more digging and found this video. It seems like they built the whole game as a 3d environment and placed everything precisely to make it look just right when looked at from the front through an orthographic camera :o

WTF! How did I miss that video. That few seconds of camera tilt explains everything. You just cleared my confusion of over a year. So, this means that their environment is using z axis but characters are only moving in x and y. Must look weird in viewport :)