Is dithering allowed to create a larger variety of tones or does it have to look pixly and 1bity, this is what i mean by dithering, it's technically using only 2 colors but it looks like more in between:

Not affiliated with the jam staff, but I would warn about using dithering. Our team used it a couple of years ago, and some people rated our game low on the “Is it 1-bit” metric, even though it was technically 1-bit. It depends on what dithering algorithm you’re using, but just make sure that it’s clear that it’s only two real colors.
I honestly think you should do research and look at games that were rated high to get a feel for what is popular during these jams because I’ve seen people use all kinds of art styles.
I have not seen a successful game that did something similar to what you are showing. I don’t think the point of the jam it to make a monochromatic game. :) I have seen some dithering (rarely) but it looked much more rough.