I really like your core loop! Using the palette to show gameplay changes is a great idea, too.
I'm also super impressed with your faux packaging presentation, that's a really nice touch!
One thing that could improve your Gameboy-ness presentation is to make sure all the sprites are pixel-perfect to the original resolution, it's most noticeable with the scrolling background being too smooth. You don't even need to change any of the physics/decimal values under the hood, you can simply snap every sprite's position when you draw them.
I really like the game though, great work!

really cool mechanics! the music matches the mood of the game really well too :D