These questions are all asked as if I am using a white black palette with all sprites having just those two colors. I think..... this question was already answered when filters were mentioned in another topic but I have never used filters before so I am not really sure what they do.

1. Can you use tweening effects to fade sprites in and out? During the tween effect things will have lots of different shades of grey. For example having a button hidden but then tweening in the transparency of the button to show that it has been unlocked.

2. Can you have sprites that stay in a faded effect to show some status? For example in a clicker type RPG you might have one monster with a 50% opacity to show it is stunned. Another example is a disabled sprite button to show that it is temporarily disabled.

The game have to be the same without effects, you can add distorsion, RGBA channel separation that makes you will have millions of colors, but if you deactivate it the game still have to be a two colors game.

You can't use filters to add fade effects or another properties that in two colors is not possible.

No gradient colors, greys or others, with the filters on/off the game have to works in the same way, filters are only applied to the final render image, not to be used as a properti to fade or do something in some sprites.

Hope my explanation was clear :P .

So if there is a rendered font, the font can't have anti-aliasing applied I take it?

Without filters All have to be 1-Bit, max 2 colors on screen, no antialias or similar. So you have to deactivate the AA to fit the rules.