For example - I find a couple of neat images, I would like to put into my game. Are we allowed to apply filters/change colors/add scanlines/etc.? In general, can we modify those assets for aesthetic purposes?
yes! quoted from the jam page, under FAQ:
Am I allowed to modify/sample/play with/remix/edit DiscMaster assets? Does that still count as using DiscMaster assets in terms of eligibility?
Yes, for sure! The purpose of this jam is to encourage people to explore and make use of the DiscMaster database—transformative use is very much encouraged!