Hey, so the rules have this in it:

1. All code, art, and audio must be created during the jam (aside from licensed assets)
   

Does this mean that we cant take free audio/music from sites like freesound or pixabay and use them in our games? I'm not quite sure what you mean by licensed assets.

You're correct - this rule is defined a bit too strict - it's main purpose is to prevent preparing code/assets beforehand.
Feel free to use free music/SFX, but for other assets (code, models, textures) we strongly advise to try create your own or with a team.

On this topic, can we use character generators to produce quick assets? Tools that help produce art assets which we can modify for our game? 

I’m no artist or animator. So a character creator can help as a baseline then I can draw over to redesign the hero or modify animations.